Impulsive Decisions: Nature or Nurture? a Stochastic Approximation Approach

In a search for a positive model of decision-making with observable primitives, we rely on the burgeoning literature in cognitive neuroscience to construct a three-element machine (agent). Its control unit initiates either impulsive or cognitive element to solve a problem in a stationary Markov environment, the element “chosen” depends on whether the problem is mundane or novel, memory of past successes and the strength of inhibition (of an impulsive reaction). For an agent with a long memory and a rather weak inhibition, the one who is alert and identifies novel (difficult) problems frequently, increasing the “carrot” and reducing the “stick” (being in a more supportive environment) enhances more thoughtful decisions (made by the cognitive unit). Doing the opposite in that case, i.e., diminishing the value of successes and increasing the pain for failures (creating a tougher environment), motivates the agent to rely on impulsive unit more often. If the agent is not very alert, or impulsive unit is sufficiently good at solving difficult problems, the effect of supportive environment crucially depends on the inhibition level. If it is high, increasing reward enough and sufficiently diminishing the loss eliminates impulsiveness altogether, whereas when inhibition is low, the result is the opposite: the agent is in the impulsive mode all the time, using cognitive unit only when forced, i.e., when a difficult problem is identified. We would like to thank for insightful discussions I. Gilboa and J. Kline, for their comments the participants of “The International Workshop on Decision Making, Game Theory and Epistemic Logic” at the University of Queensland, Australia, as well as B. von Hippel, O. Louidor, A. McLennan, D. Monderer. The first author would like to thank the Department of Economics at Tel Aviv University and the second author the Faculty of Industrial Engineering and Management at the Technion and University of Queensland School of Economics for the warm hospitality. Department of Economics, University of Illinois, USA. [email protected]. Department of Economics, University of Haifa, Israel. [email protected].