American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
The Brain as a Hierarchical Organization
American Economic Review
vol. 98,
no. 4, September 2008
(pp. 1312–46)
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. Under the first and second conflicts, we show that the uninformed system imposes a positive link between consumption and labor at every period. Furthermore, decreasing impatience endogenously emerges as a consequence of these two conflicts. Under the first and third conflicts, it becomes optimal to set a consumption cap. Finally, we discuss the behavioral implications of these rules for choice bracketing and expense tracking, and for consumption over the life cycle. (JEL D11, D74, D82, D87, D91)Citation
Brocas, Isabelle, and Juan D. Carrillo. 2008. "The Brain as a Hierarchical Organization." American Economic Review, 98 (4): 1312–46. DOI: 10.1257/aer.98.4.1312JEL Classification
- D11 Consumer Economics: Theory
- D74 Conflict; Conflict Resolution; Alliances
- D82 Asymmetric and Private Information
- D87 Neuroeconomics
- D15 Intertemporal Consumer Choice; Life Cycle Models and Saving