A Neuroeconomic Theory of the Decision Process

University Of Minnesota-Twin Cities, Minneapolis MN

Investigators

Abstract

A fundamental component of economic analysis is the theory of how economic agents make decisions. Subjective Expected Utility Theory is the standard model for such choices. It has the virtue of providing a unified analysis of decision making. It has, however, been criticized as a descriptive model of decision making and empirical tests demonstrate that its predictive power is limited. Alternative theories that reconcile the experimental and empirical evidence have been proposed. However the price paid has been the lost of a unifying view. In this research project, the PI focuses on developing a theory of the decision process, that is, a theory of the sequence of operations that take the individual from the moment in which the options are presented to the moment in which an option is selected. This theory will have to satisfy several important requirements. First, it will have to predict choices but also errors (which may occur when the same individual chooses different options in different points in time from the same set). Second, it will have to find support in auxiliary evidence, like the time to choose (response time). Finally and most importantly, it will have to provide testable implications on the effort the brain makes when making a choice, and of the neural networks recruited in the choice. In sum then, the objective is formulate an algorithmic procedure that leads from the presentation of the feasible options to the choice which detailed enough to imply hypotheses on the choices, response time, error rate as well as brain activation can and be tested experimentally.