American Economic Review: Vol. 104 No. 5 (May 2014)
Print Article Summary Export Citation
Sign up for Email Alerts Follow us on Twitter
Stochastic Choice: An Optimizing Neuroeconomic Model
Woodford, Michael. 2014. "Stochastic Choice: An Optimizing Neuroeconomic Model." American Economic Review, 104(5): 495-500.
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 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).
Article Full-Text Access
Woodford, Michael (Columbia U)
D11: Consumer Economics: Theory