American Economic Review Vol. 98 No. 4 2008
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.
- DOI
- 10.1257/aer.98.4.1312
- Volume
- 98
- Issue
- 4
- Pages
- 1312-1346
- Language
- en
- Sources
- openalex bibtex:phds-export.bib crossref