Human Economic Choice as Costly Information Processing PDF Download

Author: John W. Dickhaut
Publisher:
ISBN:
Category :
Languages : en
Pages : 0

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Book Description
We develop and test a model that provides a unified account of the neural processes underlying behavior in a classical economic choice task. The model describes in a stylized way brain processes engaged in evaluating information provided by the experimental stimuli, and produces a consistent account of several important features of the decision process in different environments: e.g., when the probability is specified or not (ambiguous choices). These features include the choices made, the time to decide, the error rate in choice, and the patterns of neural activation. The model predicts that the further two stimuli are from each other in utility space, the shorter the reaction time will be, fewer errors in choice will be made, and less neural activation will be required to make the choice. The model also predicts that choices with ambiguity can be made more quickly and will require reduced neural activation in the horizontal intra-parietal sulcus than for choices with risk. Also, everything else being equal a larger value of certainty option in the choice will induce larger neural activation, and less experience on the part of the subject making choices will induce larger activation.

Author: Paul Bourgine
Publisher: Springer Science & Business Media
ISBN: 3540247084
Category : Business & Economics
Languages : en
Pages : 479

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Book Description
The social sciences study knowing subjects and their interactions. A "cog nitive turn", based on cognitive science, has the potential to enrich these sciences considerably. Cognitive economics belongs within this movement of the social sciences. It aims to take into account the cognitive processes of individuals in economic theory, both on the level of the agent and on the level of their dynamic interactions and the resulting collective phenomena. This is an ambitious research programme that aims to link two levels of com plexity: the level of cognitive phenomena as studied and tested by cognitive science, and the level of collective phenomena produced by the economic in teractions between agents. Such an objective requires cooperation, not only between economists and cognitive scientists but also with mathematicians, physicists and computer scientists, in order to renew, study and simulate models of dynamical systems involving economic agents and their cognitive mechanisms. The hard core of classical economics is the General Equilibrium Theory, based on the optimising rationality of the agent and on static concepts of equilibrium, following a point of view systemised in the framework of Game Theory. The agent is considered "rational" if everything takes place as if he was maximising a function representing his preferences, his utility function.

Author: Richard H. Thaler
Publisher: W. W. Norton & Company
ISBN: 0393246779
Category : Business & Economics
Languages : en
Pages : 502

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Book Description
Winner of the Nobel Prize in Economics Get ready to change the way you think about economics. Nobel laureate Richard H. Thaler has spent his career studying the radical notion that the central agents in the economy are humans—predictable, error-prone individuals. Misbehaving is his arresting, frequently hilarious account of the struggle to bring an academic discipline back down to earth—and change the way we think about economics, ourselves, and our world. Traditional economics assumes rational actors. Early in his research, Thaler realized these Spock-like automatons were nothing like real people. Whether buying a clock radio, selling basketball tickets, or applying for a mortgage, we all succumb to biases and make decisions that deviate from the standards of rationality assumed by economists. In other words, we misbehave. More importantly, our misbehavior has serious consequences. Dismissed at first by economists as an amusing sideshow, the study of human miscalculations and their effects on markets now drives efforts to make better decisions in our lives, our businesses, and our governments. Coupling recent discoveries in human psychology with a practical understanding of incentives and market behavior, Thaler enlightens readers about how to make smarter decisions in an increasingly mystifying world. He reveals how behavioral economic analysis opens up new ways to look at everything from household finance to assigning faculty offices in a new building, to TV game shows, the NFL draft, and businesses like Uber. Laced with antic stories of Thaler’s spirited battles with the bastions of traditional economic thinking, Misbehaving is a singular look into profound human foibles. When economics meets psychology, the implications for individuals, managers, and policy makers are both profound and entertaining. Shortlisted for the Financial Times & McKinsey Business Book of the Year Award

Author: Barry Schwartz
Publisher: Harper Collins
ISBN: 0061748994
Category : Psychology
Languages : en
Pages : 308

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Book Description
Whether we're buying a pair of jeans, ordering a cup of coffee, selecting a long-distance carrier, applying to college, choosing a doctor, or setting up a 401(k), everyday decisions—both big and small—have become increasingly complex due to the overwhelming abundance of choice with which we are presented. As Americans, we assume that more choice means better options and greater satisfaction. But beware of excessive choice: choice overload can make you question the decisions you make before you even make them, it can set you up for unrealistically high expectations, and it can make you blame yourself for any and all failures. In the long run, this can lead to decision-making paralysis, anxiety, and perpetual stress. And, in a culture that tells us that there is no excuse for falling short of perfection when your options are limitless, too much choice can lead to clinical depression. In The Paradox of Choice, Barry Schwartz explains at what point choice—the hallmark of individual freedom and self-determination that we so cherish—becomes detrimental to our psychological and emotional well-being. In accessible, engaging, and anecdotal prose, Schwartz shows how the dramatic explosion in choice—from the mundane to the profound challenges of balancing career, family, and individual needs—has paradoxically become a problem instead of a solution. Schwartz also shows how our obsession with choice encourages us to seek that which makes us feel worse. By synthesizing current research in the social sciences, Schwartz makes the counter intuitive case that eliminating choices can greatly reduce the stress, anxiety, and busyness of our lives. He offers eleven practical steps on how to limit choices to a manageable number, have the discipline to focus on those that are important and ignore the rest, and ultimately derive greater satisfaction from the choices you have to make.

Author: Johnny Ch LOK
Publisher:
ISBN:
Category :
Languages : en
Pages : 293

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Book Description
Traditional economic theory postulates that human decision-making and behaviour are based on purely rational choice . More recent neoclassical economic approaches also rest on several fundamental assumptions aligned with rational choice theoy, that people have rational preferences among outcomes, always strive to maximise utility, and act independently based on full and relevant information. Based on these assumptions, traditional economic models predict that people will make decisions that yield the optimal result given budget constraints, and that behavioural choices can be improved by providing people with more information (i.e., by increasing knowledge/awareness) and/or more options (i.e., by increasing choices).In contrast to such assumptions, a growing body of scientific research demonstrates that people are rarely the rational decision-makers envisaged by traditional economic models of human behaviour. Empirical evidence from psychology and behavioural economics shows that consumer choices and actions often deviate systematically from neoclassical economic assumptions of rationality, and there are certain fundamental and persistent biases in human decision-making that regularly produce behaviour that these assumptions cannot account for. Hence, to understanding energy consumption, especially in terms of predicting and changing the behaviour of individuals and households. Among the most powerful and pervasive biases to influence consumers' patterns of energy usage include the status quo bias, loss and risk aversion, sunk-cost effects, temporal and spatial discounting, and the availability bias. In parallel, psychological phenomena such as normative social influence, intrinsic and extrinsic rewards, and trust may also play a key role. A large body of research shows that even where cost-benefit calculations would suggest more materially advantageous choices, people persist in displaying seemingly irrational. For example, people tend to resist change and 'go with the flow' of pre-set options, even where alternatives may yield better (e.g., more financially rewarding or materially advantageous) personal or collective outcomes. Providing a default not only saves people time (by relieving them of having to make an active choice), but it might also be viewed as the best option (since it is apparently being 'recommended' by the provider. Evidence of this status quo bias has been observed across a range of experimental and applied contexts, including residential energy consumption. For another example, people typically process only enough information to reach a satisfactory decision rather than processing all available information to reach an optimal decision, as the latter demands much more time, effort and resources than would ordinarily seem justified by the prospective increase in utility or satisfaction. Yet this tendency to settle for 'good enough' may come at a price, with people often making worse decisions and poorer choices (or avoiding action altogether) when faced with more information and/or options.Energy useful consumers can feel to avoid loss averse by weighing losses more heavily than equal-sized gains, particularly as the stakes rise. For example, people typically focus on the risks, costs or losses associated with adopting a new behaviour, such as financial costs (what will it cost me?), physical risks (is it safe/healthy?), social costs (what do others think?), ecological risks (is it environmentally friendly?), time costs (will it take longer?), functional risks (does it fit my routine?), and even psychological costs (how will I feel?), and tend to discount equivalent gains and benefits. When faced with making a decision, people perceive the disutility of losing something as far greater than the utility of gaining something (i.e., they feel the pain of losses far more than the pleasure of gains).

Author: Adam Smith
Publisher:
ISBN:
Category : Economics
Languages : en
Pages : 522

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Author: Mie Augier
Publisher: Edward Elgar Publishing
ISBN:
Category : Business & Economics
Languages : en
Pages : 488

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Book Description
This collection of essays was commissioned for this volume in honour of the ideas and work of the late Richard M. Cyert who made a seminal contribution to the fields of industrial organization and change. In keeping with the range and significance of his work, the essays in this volume examine the economics of decision making, uncertainty, information processing, learning, evolution and organizational structure. Topics covered include: behavioural and evolutionary theories of the firm; cognitive factors in organization and economic action; the place of rules in organizations; learning from experience and from the knowledge of others; selection in economic change; and the impact of information technology and the evolution of organizational forms. The collection emphasizes the adaptive nature of economic action and the links between econmies and studies of human information processing and action. It should be interesting reading for scholars with an interest in behavioural and adaptive economics, along with industrial organization.

Author: National Research Council
Publisher: National Academies Press
ISBN: 0309037492
Category : Science
Languages : en
Pages : 301

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Book Description
This volume explores the scientific frontiers and leading edges of research across the fields of anthropology, economics, political science, psychology, sociology, history, business, education, geography, law, and psychiatry, as well as the newer, more specialized areas of artificial intelligence, child development, cognitive science, communications, demography, linguistics, and management and decision science. It includes recommendations concerning new resources, facilities, and programs that may be needed over the next several years to ensure rapid progress and provide a high level of returns to basic research.

Author: Graham Mallard
Publisher: Routledge
ISBN: 1317653858
Category : Business & Economics
Languages : en
Pages : 141

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Book Description
Economics Nobel Laureate Herbert Simon developed the concept of bounded rationality in the 1950s. This asserts that the cognitive abilities of human decision-makers are not always sufficient to find optimal solutions to complex real-life problems, leading decision-makers to find satisfactory, sub-optimal outcomes. This was a foundational component of the development of Behavioural Economics but in recent years the two fields have diverged, each with its own literature, its own approach and its own proponents. Behavioural Economics explores the areas of commonality between Economics and Psychology, in terms of its focus and its approach, whereas the bounded rationality literature largely analyses the implications of sub-optimal decision‐making through the mathematically sophisticated methodology of mainstream Economics. This book examines the nature and consequences of this divergence and questions whether this is a case of beneficial specialisation or whether it is unhelpful, potentially stunting the development of some aspects of Economics. It has been suggested that the major deficiency of Behavioural Economics is that it has failed to produce a single, widely applicable alternative to constrained optimisation. This book evaluates the extent to which this is the true and, if it is, the extent to which it is a product of the divergence between the two literatures. It also seeks to identify commonalities between the two subjects and suggests avenues of research in Economics that would benefit from a re-fusion of these two fields.

Author: Paul W. Glimcher
Publisher: Academic Press
ISBN: 0123914698
Category : Psychology
Languages : en
Pages : 606

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Book Description
In the years since it first published, Neuroeconomics: Decision Making and the Brain has become the standard reference and textbook in the burgeoning field of neuroeconomics. The second edition, a nearly complete revision of this landmark book, will set a new standard. This new edition features five sections designed to serve as both classroom-friendly introductions to each of the major subareas in neuroeconomics, and as advanced synopses of all that has been accomplished in the last two decades in this rapidly expanding academic discipline. The first of these sections provides useful introductions to the disciplines of microeconomics, the psychology of judgment and decision, computational neuroscience, and anthropology for scholars and students seeking interdisciplinary breadth. The second section provides an overview of how human and animal preferences are represented in the mammalian nervous systems. Chapters on risk, time preferences, social preferences, emotion, pharmacology, and common neural currencies—each written by leading experts—lay out the foundations of neuroeconomic thought. The third section contains both overview and in-depth chapters on the fundamentals of reinforcement learning, value learning, and value representation. The fourth section, “The Neural Mechanisms for Choice, integrates what is known about the decision-making architecture into state-of-the-art models of how we make choices. The final section embeds these mechanisms in a larger social context, showing how these mechanisms function during social decision-making in both humans and animals. The book provides a historically rich exposition in each of its chapters and emphasizes both the accomplishments and the controversies in the field. A clear explanatory style and a single expository voice characterize all chapters, making core issues in economics, psychology, and neuroscience accessible to scholars from all disciplines. The volume is essential reading for anyone interested in neuroeconomics in particular or decision making in general. Editors and contributing authors are among the acknowledged experts and founders in the field, making this the authoritative reference for neuroeconomics Suitable as an advanced undergraduate or graduate textbook as well as a thorough reference for active researchers Introductory chapters on economics, psychology, neuroscience, and anthropology provide students and scholars from any discipline with the keys to understanding this interdisciplinary field Detailed chapters on subjects that include reinforcement learning, risk, inter-temporal choice, drift-diffusion models, game theory, and prospect theory make this an invaluable reference Published in association with the Society for Neuroeconomics—www.neuroeconomics.org Full-color presentation throughout with numerous carefully selected illustrations to highlight key concepts