Papers
Theories of the Mind
Isabelle Brocas and Juan D. Carrillo
Forthcoming in American Economic Review Papers and Proceedings
Paper (latest version: December 2007)
Abstract. This article summarizes the interdisciplinary line of investigation called "Neuroeconomic Theory". It argues that the evidence on brain activity developed in experimental neuroscience, neurobiology and neuroeconomics can be used to build theoretical models of individual decision-making that account for observed choices and predict behaviors. The paper describes the proposed methodology and discusses some advantages over other approaches. Finally, the methodology is illustrated with two simple models of the brain.
The Brain as a Hierarchical Organization
Isabelle Brocas and Juan D. Carrillo
Forthcoming in American Economic Review
Paper (latest version: July 2007)
Slides of a previous version (in powerpoint)
Abstract. Based on recent neuroscience evidence, we model the brain as a dual-system organization subject to three conflicts: asymmetric information, temporal horizon and incentive salience. We show that, under the first and second conflicts, the uninformed system imposes a self-disciplining rule "work more today to consume more today." We also show that decreasing impatience endogenously emerges as a consequence of these two conflicts. Under the first and third conflicts, the optimal rule becomes a simple "consume what you want but don't abuse." Last, we discuss the behavioral implications of these rules for choice bracketing and expense tracking, and for consumption over the life-cycle.
Reason, Emotion and Information Processing in the Brain
Isabelle Brocas and Juan D. Carrillo
CEPR Discussion Paper 6535
Paper (latest version: October 2007)
Slides of a previous version (in powerpoint)
Abstract. Building on evidence from neurobiology and neuroscience, we model the physiological limitations faced by individuals in the process of decision-making that starts with sensory perception and ends in action selection. The brain sets a neuronal threshold, observes whether the neuronal cell firing activity reaches the threshold or not, and takes the optimal action conditional on that (limited) information. We show that, when cell firing is imperfectly correlated with sensory perception, it is optimal to set the threshold in a way that initial beliefs are likely to be confirmed. The conclusion holds in static and dynamic settings, and with linear and quadratic loss functions. We then relate our result to the somatic marker theory, and argue that it provides support for the hypothesis that emotions help decision-making. Last, we discuss the implications for choices in concrete vs. abstract situations, for interactions in cooperative vs. competitive activities, for reactions to expected vs. unexpected events, and for the choice of cognitive vs. affective encoding channels.