Table of Contents

Rationalizing Context-Dependent Preferences: Divisive Normalization and Neurobiological Constraints on Choice

Ryan Webb, University of Toronto
Paul W. Glimcher, New York University (NYU) - Center for Neuroeconomics
Kenway Louie, New York University (NYU) - Center for Neuroeconomics


NEUROECONOMICS eJOURNAL

"Rationalizing Context-Dependent Preferences: Divisive Normalization and Neurobiological Constraints on Choice" Free Download

RYAN WEBB, University of Toronto
Email:
PAUL W. GLIMCHER, New York University (NYU) - Center for Neuroeconomics
Email:
KENWAY LOUIE, New York University (NYU) - Center for Neuroeconomics
Email:

Biology places a resource constraint on the neural computations that ultimately characterize stochastic choice behaviour. We incorporate one such computation, divisive normalization, into a neuroeconomic choice model and predict that the composition and size of the choice set will adversely influence choice. Evidence for novel violations of the IIA axiom is provided from two behavioural experiments, and the model more accurately captures observed behaviour compared to existing econometric models. Finally, we demonstrate that normalization implements an efficient means for the brain to represent valuations given neurobiological constraints, yielding the fewest choice errors possible.

^top

About this eJournal

This eJournal distributes working and accepted paper abstracts focused on research where economic outcomes are the product of many individual decisions, constrained by scarcity, and equilibrium forces that simultaneously shape a person's social networks and the institutionally defined rules of the game. Decisions are made by computations in the brain which produce action-choices that directly affect the homeostatic wellbeing of the individual and choices that indirectly change wellbeing by changing an individual's future constraints, the scope of their social networks, and their message sending rights within the institutions they participate. Neuroeconomics broadly speaking is interested in the study of these computations and the resulting choices they produce. This includes experiments that attempt to understand the mechanisms of neuronal computations that produce action-choices, theories which predict how neuronal computations in socio-economic environments produce decisions, outcomes and wellbeing, and policy which use our understanding of neuoroeconomic behavior to either build or defend better solutions to societal problems.

Editors: Michael C. Jensen, Harvard University, and Kevin A. McCabe, George Mason University

Submissions

To submit your research to SSRN, sign in to the SSRN User HeadQuarters, click the My Papers link on left menu and then the Start New Submission button at top of page.

Distribution Services

If your organization is interested in increasing readership for its research by starting a Research Paper Series, or sponsoring a Subject Matter eJournal, please email: RPS@SSRN.com

Distributed by

Economics Research Network (ERN), a division of Social Science Electronic Publishing (SSEP) and Social Science Research Network (SSRN)

Directors

ERN SUBJECT MATTER EJOURNALS

MICHAEL C. JENSEN
Harvard Business School, Social Science Electronic Publishing (SSEP), Inc., National Bureau of Economic Research (NBER), European Corporate Governance Institute (ECGI)
Email: mjensen@hbs.edu

Please contact us at the above addresses with your comments, questions or suggestions for ERN-Sub.

Advisory Board

Neuroeconomics eJournal

ANDREW W. LO
Harris & Harris Group Professor, Massachusetts Institute of Technology (MIT) - Sloan School of Management, Principal Investigator, Massachusetts Institute of Technology (MIT) - Computer Science and Artificial Intelligence Laboratory (CSAIL), National Bureau of Economic Research (NBER)

P. READ MONTAGUE
Professor, Baylor University - Department of Neuroscience

VERNON L. SMITH
Professor of Economics and Law, Chapman University - Economic Science Institute, Chapman University School of Law