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The Brain as a Hierarchical Organization

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  • Isabelle Brocas
  • Juan D. Carrillo

Abstract

We model the brain as a multi-agent organization. Based on recent neuroscience evidence, we assume that different systems of the brain have different time-horizons and different access to information. Introducing asymmetric information as a restriction on optimal choices generates endogenous constraints in decision-making. In this game played between brain systems, we show the optimality of a self-disciplining rule of the type “work more today if you want to consume more today” and discuss its behavioral implications for the distribution of consumption over the life-cycle. We also argue that our dual-system theory provides “micro-microfoundations” for discounting and offer testable implications that depart from traditional models with no conflict and exogenous discounting. Last, we analyze a variant in which the agent has salient incentives or biased motivations. The previous rule is then replaced by a simple, non-intrusive precept of the type “consume what you want, just don’t abuse”.
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Suggested Citation

  • Isabelle Brocas & Juan D. Carrillo, 2005. "The Brain as a Hierarchical Organization," Levine's Bibliography 172782000000000073, UCLA Department of Economics.
    • Handle: RePEc:cla:levrem:172782000000000073
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    More about this item

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D87 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Neuroeconomics
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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