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The Brain as a Hierarchical Organization

  • Isabelle Brocas
  • Juan D. Carrillo

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)

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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 98 (2008)
Issue (Month): 4 (September)
Pages: 1312-46

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Handle: RePEc:aea:aecrev:v:98:y:2008:i:4:p:1312-46
Note: DOI: 10.1257/aer.98.4.1312
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