An Optimizing Neuroeconomic Model of Discrete Choice

Abstract

A model is proposed in which stochastic choice results from noise in cognitive processing rather than random variation in preferences.The mental process used to make a choice is nonetheless optimal, subject to a constraint on available information-processing capacity that is partially motivated by neurophysiological evidence.The optimal information-constrained model is found to offer a better fit to experimental data on choice frequencies and reaction times than either a purely mechanical process model of choice (the drift-diffusion model) or an optimizing model with fewer constraints on feasible choice processes (the rational inattention model).

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