The impact of computation time and experience on decision values

Abstract

Most economists and neuroeconomists believe that individuals make choices first by assigning values to objects and then by selecting the option with the highest value, perhaps with some noise (Rangel, Colin Camerer, and Read Montague 2007). This raises a question with important implications for economics: How does the brain compute the values that guide decisions (henceforth called decision values) and what are the properties of those processes? Important and more concrete examples of these questions include the following: Does the brain always assign values to objects that are commensurate with the benefits that they generate, or does it make mistakes sometimes? Does the amount of time spent computing the value matter? Are there incidental variables, such as the way an object is displayed at the time of sale, that affect the value that is assigned to it? The properties of the brain's value computation processes should be of interest to economists since those properties determine the extent to which individuals are able to make quality choices. In addition, the properties of these processes could have important implications for the behavioral and welfare effects of practices such as in-store marketing. In this paper we explore these questions theoretically and experimentally. We propose a simple model of how computation time and experience can affect the value that is assigned to items. The model makes several stark predictions that we test using behavioral experiments.

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