American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Stochastic Choice: An Optimizing Neuroeconomic Model
American Economic Review
vol. 104,
no. 5, May 2014
(pp. 495–500)
Abstract
A model is proposed in which stochastic choice results from noise in cognitive processing rather than random variation in preferences. The mental process used to make a choice is nonetheless optimal, subject to a constraint on available information-processing capacity that is motivated by neurophysiological evidence. The optimal information-constrained model is found to offer a better fit to experimental data on choice frequencies and reaction times than either a purely mechanical process model of choice (the drift-diffusion model) or an optimizing model with fewer constraints on feasible choice processes (the rational inattention model).Citation
Woodford, Michael. 2014. "Stochastic Choice: An Optimizing Neuroeconomic Model." American Economic Review, 104 (5): 495–500. DOI: 10.1257/aer.104.5.495Additional Materials
JEL Classification
- D11 Consumer Economics: Theory
- D87 Neuroeconomics