An Optimizing Neuroeconomic Model of Discrete Choice
Michael Woodford ()
No 19897, NBER Working Papers from National Bureau of Economic Research, Inc
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 partially 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: C25 C91 D87 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dcm, nep-exp, nep-neu and nep-ore
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