From perception to action: An economic model of brain processes

Isabelle Brocas and Juan D. Carrillo

Games and Economic Behavior, 2012, vol. 75, issue 1, 81-103

Abstract: We build on research from neurobiology to model the process through which the brain maps outside evidence into decisions. The sensory system encodes information through cell-firing. Cell-firing is measured against a threshold, and an action is triggered depending on whether the threshold is surpassed. The decision system modulates the threshold. We show that the (constrained) optimal threshold is set in a way that existing beliefs are likely to be confirmed. We then derive behavioral implications. Our mechanism can explain in a unified framework a number of ‘anomalies’ noted in psychology and economics: (i) belief anchoring (the order in which evidence is received affects beliefs and choices); (ii) polarization (individuals with opposite priors may polarize their opinions after receiving identical evidence); (iii) payoff-dependence of beliefs and (iv) belief disagreement (individuals with identical priors who receive the same evidence may end up with different posterior beliefs).

Keywords: Neuroeconomic theory; Information processing; Bayesian updating (search for similar items in EconPapers)
JEL-codes: D81 D83 D87 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:gamebe:v:75:y:2012:i:1:p:81-103

DOI: 10.1016/j.geb.2011.10.001

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