Cost-benefit analysis in reasoning

Larbi Alaoui () and Antonio Penta ()
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Larbi Alaoui: https://www.upf.edu/web/econ/faculty/-/asset_publisher/6aWmmXf28uXT/persona/id/3637071

Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra

Abstract: When an individual thinks about a problem, his decision to reason further may involve a tradeo between cognitive costs and a notion of value. But it is not obvious that this is always the case, and the value of reasoning is not well-de ned. This pa- per analyzes the primitive properties of the reasoning process that must hold for the decision to stop thinking to be represented by a cost-bene t analysis. We nd that the properties that characterize the cost-bene t representation are weak and intuitive, suggesting that such a representation is justi ed for a large class of problems. We then provide additional properties that give more structure to the value of reasoning func- tion, including `value of information' and `maximum gain' representations. We show how our model applies to a variety of settings, including contexts involving sequential heuristics in choice, response time, reasoning in games and research. Our model can also be used to understand economically relevant patterns of behavior for which the cost-bene t approach does not seem to hold. These include choking under pressure and (over)thinking aversion.

Keywords: cognition and incentives; choice theory; reasoning; fact-free learning; sequential heuristics (search for similar items in EconPapers)
JEL-codes: D01 D03 D80 D83 (search for similar items in EconPapers)
Date: 2018-10
New Economics Papers: this item is included in nep-cbe and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Working Paper: Cost-Benefit Analysis in Reasoning (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:upf:upfgen:1621

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