Papers
The Brain as a Hierarchical Organization
Isabelle Brocas and Juan D. Carrillo
American Economic Review, 98(4), 1312-1346, (2008)
Paper
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.
Theories of the Mind
Isabelle Brocas and Juan D. Carrillo
American Economic Review, Papers and Proceedings, 98(2), 175-180, (2008)
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.
From Perception to Action: an Economic Model of Brain Processes
Isabelle Brocas and Juan D. Carrillo
CEPR Discussion Paper 6535
(revised version of "Reason, Emotion and Information Processing in the Brain")
Paper (latest version: February 2009)
Slides (in powerpoint)
Abstract. We build on evidence from neurobiology to model the process through which the brain maps evidence received from the outside world into decisions. This mechanism can be represented by a decision-threshold model. The sensory system encodes information in the form of cell-firing. Cell-firing is then measured against a threshold and an action is triggered depending on whether the threshold is surpassed. The decision system is responsible for modulating the threshold. We show that, for a large class of situations, the (constrained) optimal threshold is set in a way that existing beliefs are likely to be confirmed. We then derive behavioral implications of this theory. Our mechanism predicts: (i) belief anchoring (the order in which evidence is received affects both beliefs and choices); (ii) polarization (individuals with opposite priors may polarize their opinions when receiving mixed evidence); (iii) payoff-dependence of beliefs and (iv) belief disagreement (individuals with identical priors who receive the same evidence may end up with different posterior beliefs).
Information Processing and Decision-making: Evidence from the Brain Sciences and Implications for Economics
Isabelle Brocas
mimeo, USC
Paper (latest version: April 2009)
Abstract. This article provides a motivated summary of findings in neurobiology and assesses the potential benefits of including such findings in economic decision-making models. We emphasize that the evidence supports both 'expected utility-like' theory and 'Bayesian-like' information acquisition theory. However, we report that inferences and representations are subject to physiological limitations (or constraints) that may explain some observed departures from these theories, and rationalize some behavioral biases. Understanding the underlying processes that maps the formulation of a problem to a decision-maker into an actual decision may help build theories capable of predicting choice more accurately.