Dual decision processes: retrieving preferences when some choices are automatic

Abstract

Evidence from the cognitive sciences suggests that some choices are conscious and reflect individual volition while others tend to be automatic, being driven by analogies with past experiences. Under these circumstances, standard economic modeling might not always be applicable because not all choices are the result of individual tastes. We propose a behavioral model that can be used in standard economic analysis that formalizes the way in which conscious and automatic choices arise by presenting a decision maker comprised of two selves. One self compares past decision problems with the one the decision maker faces and, when the problems are similar enough, it replicates past behavior (Automatic choices). Otherwise, a second self is activated and preferences are maximized (Conscious choices). We then present a novel method capable of identifying a set of conscious choices from observed behavior and discuss its usefulness as a framework for studying asymmetric pricing and empirical puzzles in different settings.