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Benefits of Neuroeconomic Modeling: New Policy Interventions and Predictors of Preference

Author

Listed:
  • Ian Krajbich
  • Bastiaan Oud
  • Ernst Fehr

Abstract

Neuroeconomics strives to use knowledge from neuroscience to improve models of decisionmaking. Here we introduce a biologically plausible, drift-diffusion model that is able to jointly predict choice behavior and response times across different choice environments. The model has both normative and positive implications for economics. First, we consistently observe that decisionmakers inefficiently allocate their time to choices for which they are close to indifference. We demonstrate that we can improve subjects' welfare using a simple intervention that puts a time limit on their choices. Second, response times can be used to predict indifference points and the strength of preferences.

Suggested Citation

  • Ian Krajbich & Bastiaan Oud & Ernst Fehr, 2014. "Benefits of Neuroeconomic Modeling: New Policy Interventions and Predictors of Preference," American Economic Review, American Economic Association, vol. 104(5), pages 501-506, May.
  • Handle: RePEc:aea:aecrev:v:104:y:2014:i:5:p:501-06
    Note: DOI: 10.1257/aer.104.5.501
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    Citations

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    Cited by:

    1. Fadong Chen & Urs Fischbacher, 2015. "Cognitive Processes of Distributional Preferences: A Response Time Study," TWI Research Paper Series 101, Thurgauer Wirtschaftsinstitut, Universität Konstanz.
    2. Marta Dyrkacz & Michal Krawczyk, 2015. "Exploring the role of deliberation time in non-selfish behaviour: the Double Response method," Working Papers 2015-27, Faculty of Economic Sciences, University of Warsaw.
    3. Benjamin Hébert & Michael Woodford, 2017. "Rational Inattention and Sequential Information Sampling," NBER Working Papers 23787, National Bureau of Economic Research, Inc.
    4. Arkady Konovalov & Ian Krajbich, 2016. "Revealed Indifference: Using Response Times to Infer Preferences," Working Papers 16-01, Ohio State University, Department of Economics.
    5. repec:eee:soceco:v:72:y:2018:i:c:p:121-134 is not listed on IDEAS
    6. Merkel, Anna & Lohse, Johannes, 2016. "Is fairness intuitive? An experiment accounting for the role of subjective utility differences under time pressure," Working Papers 0627, University of Heidelberg, Department of Economics.
    7. Laura Enax & Ian Krajbich & Bernd Weber, 2016. "Salient nutrition labels increase the integration of health attributes in food decision-making," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 11(5), pages 460-471, September.
    8. Michael Woodford, 2014. "An Optimizing Neuroeconomic Model of Discrete Choice," NBER Working Papers 19897, National Bureau of Economic Research, Inc.
    9. Michał Krawczyk, 2018. "Drift-diffusion models: a direct verification," Working Papers 2018-12, Faculty of Economic Sciences, University of Warsaw.
    10. Fadong Chen & Urs Fischbacher, 2016. "Response time and click position: cheap indicators of preferences," Journal of the Economic Science Association, Springer;Economic Science Association, vol. 2(2), pages 109-126, November.
    11. repec:eee:jeborg:v:139:y:2017:i:c:p:49-59 is not listed on IDEAS
    12. repec:kap:enreec:v:67:y:2017:i:3:d:10.1007_s10640-016-0029-z is not listed on IDEAS
    13. repec:eee:jeborg:v:148:y:2018:i:c:p:344-375 is not listed on IDEAS
    14. Merkel, Anna & Lohse, Johannes, 2018. "Is fairness intuitive? An experiment accounting for subjective utility differences under time pressure," Working Papers 0647, University of Heidelberg, Department of Economics.
    15. repec:eee:pubeco:v:160:y:2018:i:c:p:132-147 is not listed on IDEAS
    16. Ismaël Rafaï & Mira Toumi, 2017. "Pay Attention or Be Paid for Attention? Impact of Incentives on Allocation of Attention," GREDEG Working Papers 2017-11, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), University of Nice Sophia Antipolis.

    More about this item

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D87 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Neuroeconomics

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