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Neuroeconomic Foundations of Economic Choice--Recent Advances

Author

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  • Ernst Fehr
  • Antonio Rangel

Abstract

Neuroeconomics combines methods and theories from neuroscience psychology, economics, and computer science in an effort to produce detailed computational and neurobiological accounts of the decision-making process that can serve as a common foundation for understanding human behavior across the natural and social sciences. Because neuroeconomics is a young discipline, a sufficiently sound structural model of how the brain makes choices is not yet available. However, the contours of such a computational model are beginning to arise; and, given the rapid progress, there is reason to be hopeful that the field will eventually put together a satisfactory structural model. This paper has two goals: First, we provide an overview of what has been learned about how the brain makes choices in two types of situations: simple choices among small numbers of familiar stimuli (like choosing between an apple or an orange), and more complex choices involving tradeoffs between immediate and future consequences (like eating a healthy apple or a less-healthy chocolate cake). Second, we show that, even at this early stage, insights with important implications for economics have already been gained.

Suggested Citation

  • Ernst Fehr & Antonio Rangel, 2011. "Neuroeconomic Foundations of Economic Choice--Recent Advances," Journal of Economic Perspectives, American Economic Association, vol. 25(4), pages 3-30, Fall.
  • Handle: RePEc:aea:jecper:v:25:y:2011:i:4:p:3-30
    Note: DOI: 10.1257/jep.25.4.3
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    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jep.25.4.3
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    File URL: http://www.aeaweb.org/jep/app/2504_Fehr_app.pdf
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    References listed on IDEAS

    as
    1. B. Douglas Bernheim & Antonio Rangel, 2009. "Beyond Revealed Preference: Choice-Theoretic Foundations for Behavioral Welfare Economics," The Quarterly Journal of Economics, Oxford University Press, vol. 124(1), pages 51-104.
    2. Basten U & Biele G. P. & Heekeren H. R. & Fiebach, 2010. "How the brain integrates costs and benefits during decision making," SFB 649 Discussion Papers SFB649DP2010-063, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
    3. Benjamin Bushong & Lindsay M. King & Colin F. Camerer & Antonio Rangel, 2010. "Pavlovian Processes in Consumer Choice: The Physical Presence of a Good Increases Willingness-to-Pay," American Economic Review, American Economic Association, vol. 100(4), pages 1556-1571, September.
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    Cited by:

    1. Brette, Olivier & Buhler, Thomas & Lazaric, Nathalie & Marechal, Kevin, 2014. "Reconsidering the nature and effects of habits in urban transportation behavior," Journal of Institutional Economics, Cambridge University Press, vol. 10(03), pages 399-426, September.
    2. J. Silvestre, & T. Araújo & M. St. Aubyn, 2016. "Economic growth and individual satisfaction in an agent-based economy," Working Papers Department of Economics 2016/19, ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa.
    3. S., Sanchez Pages & E., Tureigano, 2013. "Two Studies on the Interplay between Social Preferences and Individual Biological Features," SIRE Discussion Papers 2013-46, Scottish Institute for Research in Economics (SIRE).
    4. Perez-Truglia, Ricardo, 2012. "On the causes and consequences of hedonic adaptation," Journal of Economic Psychology, Elsevier, vol. 33(6), pages 1182-1192.
    5. Batrancea Larissa-Margareta & Nichita Ramona-Anca, 2012. "A Neuroeconomic Approach Of Tax Behavior," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(1), pages 649-654, July.
    6. V. I. Yukalov & D. Sornette, 2012. "Quantum decision making by social agents," Papers 1202.4918, arXiv.org, revised Oct 2015.
    7. Gebhard Kirchgässner, 2013. "The Weak Rationality Principle in Economics," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 149(I), pages 1-26, March.
    8. Jerome R. Busemeyer & Jörg Rieskamp, 2014. "Psychological research and theories on preferential choice," Chapters,in: Handbook of Choice Modelling, chapter 3, pages 49-72 Edward Elgar Publishing.
    9. Sonntag, Axel, 2015. "Search costs and adaptive consumers: Short time delays do not affect choice quality," Journal of Economic Behavior & Organization, Elsevier, vol. 113(C), pages 64-79.
    10. Kenneth Gillingham & Karen Palmer, 2014. "Bridging the Energy Efficiency Gap: Policy Insights from Economic Theory and Empirical Evidence," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 8(1), pages 18-38, January.
    11. Jan Hausfeld & Sven Resnjanskij, 2017. "Risky Decisions and the Opportunity Costs of Time," TWI Research Paper Series 108, Thurgauer Wirtschaftsinstitut, Universität Konstanz.
    12. Michael Woodford, 2014. "Stochastic Choice: An Optimizing Neuroeconomic Model," American Economic Review, American Economic Association, vol. 104(5), pages 495-500, May.
    13. Artavia-Mora, Luis & Bedi, Arjun S. & Rieger, Matthias, 2017. "Intuitive help and punishment in the field," European Economic Review, Elsevier, vol. 92(C), pages 133-145.
    14. Massenot, Baptiste, 2018. "A business cycle model with neuroeconomic foundations," SAFE Working Paper Series 194, Research Center SAFE - Sustainable Architecture for Finance in Europe, Goethe University Frankfurt.
    15. Andrew Caplin & Daniel Martin, 2016. "The Dual-Process Drift Diffusion Model: Evidence From Response Times," Economic Inquiry, Western Economic Association International, vol. 54(2), pages 1274-1282, April.
    16. Krajbich, Ian & Camerer, Colin & Rangel, Antonio, 2017. "Exploring the scope of neurometrically informed mechanism design," Games and Economic Behavior, Elsevier, vol. 101(C), pages 49-62.
    17. Benjamin Hébert & Michael Woodford, 2017. "Rational Inattention and Sequential Information Sampling," NBER Working Papers 23787, National Bureau of Economic Research, Inc.
    18. Brocas, Isabelle & Carrillo, Juan D., 2014. "Dual-process theories of decision-making: A selective survey," Journal of Economic Psychology, Elsevier, vol. 41(C), pages 45-54.
    19. 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.
    20. Caplin, Andrew, 2014. "Rational inattention and revealed preference: The data-theoretic approach to economic modeling," Research in Economics, Elsevier, vol. 68(4), pages 295-305.
    21. Grossman, Zachary & van der Weele, Joël & Andrijevik, Ana, 2014. "A Test of Dual-Process Reasoning in Charitable Giving," University of California at Santa Barbara, Economics Working Paper Series qt4tm617f7, Department of Economics, UC Santa Barbara.
    22. Tatevik Mkrtchyan, 2016. "Modern Transformations of Economics: Neuroeconomics," Theory Methodology Practice (TMP), Faculty of Economics, University of Miskolc, vol. 12(02), pages 15-24.
    23. S. Cerreia-Vioglio & F. Maccheroni & M. Marinacci & A. Rustichini, 2017. "Multinomial logit processes and preference discovery: inside and outside the black box," Working Papers 615, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.

    More about this item

    JEL classification:

    • D87 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Neuroeconomics
    • D87 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Neuroeconomics

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