Working Paper: CEPR ID: DP5168
Authors: 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 behavioural implications for the distribution of consumption over the life-cycle. We also argue that our split-self theory provides 'micro-microfoundations' for discounting and offer testable implications that depart from traditional models with no conflict and exogenous discounting. Last, we analyse 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'.
Keywords: Dual Self Model; Neuroeconomics
JEL Codes: D82; Z0
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| asymmetric information (D82) | endogenous constraints in decision-making (D91) |
| principal's ability to impose decisions (D70) | agent's private knowledge and myopic preferences (D82) |
| source of wealth and labor opportunities (F16) | distribution of consumption over the life cycle (D15) |
| agent's actions influenced by salient incentives (D82) | principal's intervention strategy (I24) |
| agent's cooperation (L85) | optimal level of consumption and labor (J29) |