Paper #1550

Title:

Dual decision processes: Retrieving preferences when some choices are intuitive

Author:

Francesco Cerigioni

Date:

September 2016

Abstract:

Evidence from cognitive sciences shows that some choices are conscious and re ect individual prefer- ences while others tend to be intuitive, driven by analogies with past experiences. Under these circum- stances, usual economic modeling might not be valid because not all choices are the consequence of individual tastes. We here propose a behavioral model that can be used in standard economic analysis that formalizes how conscious and intuitive choices arise by presenting a decision maker composed by two systems. One system compares past decision problems with the one the decision maker faces, and it replicates past behavior when the problems are similar enough (Intuitive choices). Otherwise, a second system is activated and preferences are maximized (Conscious choices). We then present a novel method capable of nding conscious choices just from observed behavior and nally, we provide a choice theoretical foundation of the model and discuss its importance as a general framework to study behavioral inertia.

Keywords:

Dual Processes, Fast and Slow Thinking, Similarity, Revealed Preferences, Memory, Intuition

JEL codes:

D01, D03, D60

Area of Research:

Behavioral and Experimental Economics

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