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The Brain as a Hierarchical Organization

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Author Info
Isabelle Brocas
Juan D. Carillo
Abstract

We model the brain as a multi-agent organization. Based on recent neuroscience evidence, we assume that different systems of the brain have different time-horizons and different access to information. Introducing asymmetric information as a restriction on optimal choices generates endogenous constraints in decision-making. In this game played between brain systems, we show the optimality of a self-disciplining rule of the type “work more today if you want to consume more today” and discuss its behavioral implications for the distribution of consumption over the life-cycle. We also argue that our dual-system theory provides “micro-microfoundations” for discounting and offer testable implications that depart from traditional models with no conflict and exogenous discounting. Last, we analyze a variant in which the agent has salient incentives or biased motivations. The previous rule is then replaced by a simple, non-intrusive precept of the type “consume what you want, just don’t abuse”.

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File URL: http://www.usc.edu/dept/LAS/economics/IEPR/Working%20Papers/IEPR_06.48_%5BBrocas,Carillo%5D.pdf
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File Function: First version, 2006
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Paper provided by Institute of Economic Policy Research (IEPR) in its series IEPR Working Papers with number 06.48.

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Length: 37 pages
Date of creation: Apr 2006
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Handle: RePEc:scp:wpaper:06-48

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