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Neural antecedents of a random utility model

Listed author(s):
  • Lusk, Jayson L.
  • Crespi, John M.
  • McFadden, Brandon R.
  • Cherry, J. Bradley C.
  • Martin, Laura
  • Bruce, Amanda

For over a decade, economists have sought to identify neural antecedents for economic theories. More recently, neuroeconomic work has sought to predict consumer choice using brain activations witnessed in non-choice, visual appraisals. This paper combines these two emerging strains of inquiry. Using functional magnetic resonance imaging (fMRI) data observed when consumers view a quality-differentiated food product labeled with different attributes, we seek to determine the predictive validity of the random utility model (RUM) often used in economic studies of consumer choice. Our fMRI data consist of changes in blood flow to the ventromedial prefrontal cortex (a brain region previously associated with value formation) observed when people saw low price and high labels and labels indicating high or low quality. We couple the fMRI data with data on 28 non-hypothetical choices made by each participant, which pitted higher priced, higher quality good vs. a lower priced, lower quality good. We find little evidence of a systematic difference in activation in brain areas thought to be associated with value formation when viewing high vs. low levels of attributes (prices and quality). However, differences in neural blood flow across participants related to quality (but not price) is significantly related to subsequent consumer choice both in- and out-of-sample, providing some qualified neuroeconomic support for the attribute-based RUM.

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File URL: http://www.sciencedirect.com/science/article/pii/S0167268116302098
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Article provided by Elsevier in its journal Journal of Economic Behavior & Organization.

Volume (Year): 132 (2016)
Issue (Month): PA ()
Pages: 93-103

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Handle: RePEc:eee:jeborg:v:132:y:2016:i:pa:p:93-103
DOI: 10.1016/j.jebo.2016.09.018
Contact details of provider: Web page: http://www.elsevier.com/locate/jebo

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  1. John M. Crespi & Jayson L. Lusk & J. Bradley C. Cherry & Laura E. Martin & Brandon R. McFadden & Amanda S. Bruce, 2016. "Neural Activations Associated with Decision-time and Choice in a Milk Labeling Experiment," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 98(1), pages 74-91.
  2. Knutson, Brian & Peterson, Richard, 2005. "Neurally reconstructing expected utility," Games and Economic Behavior, Elsevier, vol. 52(2), pages 305-315, August.
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  6. Rosen, Sherwin, 1974. "Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition," Journal of Political Economy, University of Chicago Press, vol. 82(1), pages 34-55, Jan.-Feb..
  7. Kelvin J. Lancaster, 1966. "A New Approach to Consumer Theory," Journal of Political Economy, University of Chicago Press, vol. 74, pages 132-132.
  8. Norwood, F. Bailey & Lusk, Jayson L., 2011. "Compassion, by the Pound: The Economics of Farm Animal Welfare," OUP Catalogue, Oxford University Press, number 9780199551163.
  9. Danny Campbell & Seda Erdem, 2015. "Position Bias in Best-worst Scaling Surveys: A Case Study on Trust in Institutions," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 97(2), pages 526-545.
  10. Norwood, F. Bailey & Lusk, Jayson L. & Brorsen, B. Wade, 2004. "Model Selection for Discrete Dependent Variables: Better Statistics for Better Steaks," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 29(03), December.
  11. James Murphy & P. Allen & Thomas Stevens & Darryl Weatherhead, 2005. "A Meta-analysis of Hypothetical Bias in Stated Preference Valuation," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 30(3), pages 313-325, 03.
  12. David A. Hensher, 2006. "How do respondents process stated choice experiments? Attribute consideration under varying information load," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 21(6), pages 861-878.
  13. Bailey Norwood & Matthew C. Roberts & Jayson L. Lusk, 2004. "Ranking Crop Yield Models Using Out-of-Sample Likelihood Functions," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(4), pages 1032-1043.
  14. Tülin Erdem, 1996. "A Dynamic Analysis of Market Structure Based on Panel Data," Marketing Science, INFORMS, vol. 15(4), pages 359-378.
  15. Chang, Jae Bong & Lusk, Jayson L. & Norwood, F. Bailey, 2010. "The Price of Happy Hens: A Hedonic Analysis of Retail Egg Prices," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 35(3), December.
  16. Colin F. Camerer, 2007. "Neuroeconomics: Using Neuroscience to Make Economic Predictions," Economic Journal, Royal Economic Society, vol. 117(519), pages 26-42, 03.
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