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Drift-diffusion models: a direct verification

Author

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  • Michał Krawczyk

    (Faculty of Economic Sciences, University of Warsaw)

Abstract

I conduct a laboratory experiment aimed at verifying the drift-diffusion model. The subjects are shown a sequence of noisy signals of the difference in cash value of two options. Every realization of the signal was costly and the subjects could stop observing it and make their decision at any point. As the cost of the signal, the expected value of each option, the standard deviation of these values and the actual values were systematically varied across 200 rounds, several predictions of the model could be put to a test. In all but one case these predictions were correct.

Suggested Citation

  • Michał Krawczyk, 2018. "Drift-diffusion models: a direct verification," Working Papers 2018-12, Faculty of Economic Sciences, University of Warsaw.
    • Handle: RePEc:war:wpaper:2018-12
    as

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    File URL: https://www.wne.uw.edu.pl/index.php/download_file/4220/
    File Function: First version, 2018
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    References listed on IDEAS

    as
    1. Ian Krajbich & Bastiaan Oud & Ernst Fehr, 2014. "Benefits of Neuroeconomic Modeling: New Policy Interventions and Predictors of Preference," American Economic Review, American Economic Association, vol. 104(5), pages 501-506, May.
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    More about this item

    Keywords

    drift-diffusion model; sequential sampling;

    JEL classification:

    • C9 - Mathematical and Quantitative Methods - - Design of Experiments
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • D9 - Microeconomics - - Micro-Based Behavioral Economics

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