DP5168 The Brain as a Hierarchical Organization

Author(s): Isabelle Brocas, Juan D Carrillo
Publication Date: August 2005
Keyword(s): dual self model, neuroeconomics
JEL(s): D82, Z0
Programme Areas: Public Economics, Industrial Organization
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=5168

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'.