Stochastic Choice: An Optimizing Neuroeconomic Model

Michael Woodford

American Economic Review, 2014, vol. 104, issue 5, 495-500

Abstract: A model is proposed in which stochastic choice results from noise in cognitive processing rather than random variation in preferences. The mental process used to make a choice is nonetheless optimal, subject to a constraint on available information-processing capacity that is motivated by neurophysiological evidence. The optimal information-constrained model is found to offer a better fit to experimental data on choice frequencies and reaction times than either a purely mechanical process model of choice (the drift-diffusion model) or an optimizing model with fewer constraints on feasible choice processes (the rational inattention model).

JEL-codes: D11 D87 (search for similar items in EconPapers)
Date: 2014
Note: DOI: 10.1257/aer.104.5.495
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Citations: View citations in EconPapers (60)

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