Download A common mechanism underlying economic decision

A common mechanism underlying economic decision making
Ian Krajbich
Abstract: A fundamental goal in neuroeconomics is to draw on fundamental principles from neuroscience to inform and constrain models of decision
making. Here I will discuss a number of ways in which we have used such
principles to improve our understanding of choice behavior. I will focus on a
dynamical, ”drift-diffusion model” of how choices are formed over time, and
use that model to illustrate common principles underlying both perceptual
and economic choice. I will show that economic decisions are constrained
by subjects’ imperfect knowledge of their own preferences, by their limited
attention, and by their adaptation to different ranges of values in their environment. With this model, I will demonstrate that choice behavior is
consistent across different choice domains. The model also goes beyond the
traditional approach as it is able to additionally account for eye-movements,
response times, and brain activity. Finally, I will discuss some applications
of the model, including work on information cascades and social preferences.
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