Affiliation:
1. Department of Economics, University of Southern California, 3620 S. Vermont Ave., Los Angeles, CA 90089-0253, and CEPR.
Abstract
Based on recent neuroscience evidence, we model the brain as a dual-system organization subject to three conflicts: asymmetric information, temporal horizon, and incentive salience. Under the first and second conflicts, we show that the uninformed system imposes a positive link between consumption and labor at every period. Furthermore, decreasing impatience endogenously emerges as a consequence of these two conflicts. Under the first and third conflicts, it becomes optimal to set a consumption cap. Finally, we discuss the behavioral implications of these rules for choice bracketing and expense tracking, and for consumption over the life cycle. (JEL D11, D74, D82, D87, D91)
Publisher
American Economic Association
Subject
Economics and Econometrics
Cited by
128 articles.
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