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Cost-Benefit Analysis in Reasoning

Author

Listed:
  • Larbi Alaoui
  • Antonio Penta

Abstract

An individual’s decision to reason about a problem may involve a trade-off between cognitive costs and a notion of value. This paper analyzes the primitive properties that must hold for the decision to stop thinking to be represented by a cost-benefit analysis. We then provide additional properties that give more structure to the value of reasoning function. We show how our model applies to a variety of settings, including contexts involving R&D applications, response time, and strategic reasoning. Our model can also be used to understand patterns of behavior for which the cost-benefit approach does not seem to hold.

Suggested Citation

  • Larbi Alaoui & Antonio Penta, 2022. "Cost-Benefit Analysis in Reasoning," Journal of Political Economy, University of Chicago Press, vol. 130(4), pages 881-925.
    • Handle: RePEc:ucp:jpolec:doi:10.1086/718378
    DOI: 10.1086/718378
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    Cited by:

    1. Ignacio Palacios-Huerta & David C. Parkes & Richard Steinberg, 2024. "Combinatorial Auctions in Practice," Journal of Economic Literature, American Economic Association, vol. 62(2), pages 517-553, June.
    2. Duarte Gonc{c}alves, 2022. "Sequential Sampling Equilibrium," Papers 2212.07725, arXiv.org, revised Nov 2023.
    3. Wei James Chen & Meng-Jhang Fong & Po-Hsuan Lin, 2023. "Measuring Higher-Order Rationality with Belief Control," Papers 2309.07427, arXiv.org, revised Dec 2024.
    4. Sulka, Tomasz, 2023. "Planning and saving for retirement," European Economic Review, Elsevier, vol. 160(C).
    5. Benjamin Patrick Evans & Mikhail Prokopenko, 2024. "Bounded rationality for relaxing best response and mutual consistency: the quantal hierarchy model of decision making," Theory and Decision, Springer, vol. 96(1), pages 71-111, February.
    6. Denti, Tommaso, 2023. "Unrestricted information acquisition," Theoretical Economics, Econometric Society, vol. 18(3), July.
    7. Castagnetti, Alessandro & Proto, Eugenio & Sofianos, Andis, 2023. "Anger impairs strategic behavior: A Beauty-Contest based analysis," Journal of Economic Behavior & Organization, Elsevier, vol. 213(C), pages 128-141.

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