Human Economic Choice as Costly Information Processing

43 Pages Posted: 16 Feb 2018

See all articles by John W. Dickhaut

John W. Dickhaut

Chapman University (Deceased)

Vernon L. Smith

Chapman University - Economic Science Institute; Chapman University School of Law

Baohua Xin

University of Toronto - Rotman School of Management

Aldo Rustichini

University of Minnesota - Twin Cities - Department of Economics

Date Written: July 31, 2013

Abstract

We develop and test a model that provides a unified account of the neural processes underlying behavior in a classical economic choice task. The model describes in a stylized way brain processes engaged in evaluating information provided by the experimental stimuli, and produces a consistent account of several important features of the decision process in different environments: e.g., when the probability is specified or not (ambiguous choices). These features include the choices made, the time to decide, the error rate in choice, and the patterns of neural activation.

The model predicts that the further two stimuli are from each other in utility space, the shorter the reaction time will be, fewer errors in choice will be made, and less neural activation will be required to make the choice. The model also predicts that choices with ambiguity can be made more quickly and will require reduced neural activation in the horizontal intra-parietal sulcus than for choices with risk. Also, everything else being equal a larger value of certainty option in the choice will induce larger neural activation, and less experience on the part of the subject making choices will induce larger activation.

Keywords: Experimental Economics, Neuroeconomics, Economic Choices

JEL Classification: D87

Suggested Citation

Dickhaut, John and Smith, Vernon L. and Xin, Baohua and Rustichini, Aldo, Human Economic Choice as Costly Information Processing (July 31, 2013). Journal of Economic Behavior and Organization, Vol. 94, 2013. Available at SSRN: https://ssrn.com/abstract=3118652

John Dickhaut

Chapman University (Deceased)

Vernon L. Smith

Chapman University - Economic Science Institute ( email )

One University Dr.
Orange, CA 92866
United States
714-628-2830 (Phone)

Chapman University School of Law ( email )

One University Drive
Orange, CA 92866-1099
United States

Baohua Xin (Contact Author)

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

Aldo Rustichini

University of Minnesota - Twin Cities - Department of Economics ( email )

271 19th Avenue South
Minneapolis, MN 55455
United States

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