Abstract

In this lecture, we discuss how neuroscience can discipline theoretical models of decision making. We argue that the brain is, and therefore should be modelled as, a multi-system organization. Experimental neuroscience and neurobiology provide detailed evidence of the functionality, interconnectivity and physiological limitations of the different brain systems involved in the process of decision-making. Microeconomic theory supplies the toolkit to build simple economic models that incorporate these system interactions and well-defined constraints in the mechanisms of choice. Unlike behavioral economic theories where bounded rationality can be modeled in a countless number of ways, this methodology provides precise guidelines regarding the frictions and constraints that should be imposed in the choice process. We illustrate this approach with three theories: (i) a theory of dynamic choice given an intertemporal conflict of preferences; (ii) a theory of optimal allocation of scarce resources for different tasks; and (iii) a theory of consumption of tempting goods with negative long-term consequences.

Reference

Juan D. Carrillo (University of Southern California), “Neuroeconomic Theory: using neuroscience to understand the bounds of rationality”, IAST General Seminar, Toulouse: IAST, June 17, 2022, 11:30–12:30, room Auditorium 6.