The Brain as a Hierarchical Organization

The Brain as a Hierarchical Organization Abstract 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 ) http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png American Economic Review American Economic Association

The Brain as a Hierarchical Organization

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Publisher
American Economic Association
Copyright
Copyright © 2008 by the American Economic Association
Subject
Articles
ISSN
0002-8282
D.O.I.
10.1257/aer.98.4.1312
Publisher site
See Article on Publisher Site

Abstract

Abstract 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 )

Journal

American Economic ReviewAmerican Economic Association

Published: Sep 1, 2008

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