Behavioral Signatures of Cognitive Noise

Ryan Oprea and Michael Woodford

No 35714, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The cognitive noise hypothesis is an increasingly popular explanation for a wide range of puzzling regularities in human behavior. Using simple, familiar tools and minimal assumptions drawn from neuroscience, cognitive noise models provide a parsimonious, unified explanation for a number of the most important anomalies documented in behavioral economics. The hypothesis proposes that limited cognitive resources force the brain to represent information imprecisely, generating coarser decisions, stochastic behavior and subjective uncertainty. Because brains deal with this kind of imprecision in a broadly Bayesian manner, imprecision leads to a number of well-known behavioral biases that may in fact be optimal given that imprecision. Because brains also allocate scarce cognitive resources adaptively, these biases and their severity are impacted by seemingly-irrelevant aspects of the choice environment, providing an explanation for a number of well-known context and experience effects that are otherwise difficult to explain. We review the basic structure of these models, their behavioral consequences, and the growing body of empirical evidence supporting them.

JEL-codes: D81 D91 (search for similar items in EconPapers)
Date: 2026-09
Note: ME
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.nber.org/papers/w35714.pdf (application/pdf)
Access to the full text is generally limited to series subscribers, however if the top level domain of the client browser is in a developing country or transition economy free access is provided. More information about subscriptions and free access is available at http://www.nber.org/wwphelp.html. Free access is also available to older working papers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:35714

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w35714
The price is Paper copy available by mail.

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().