Cognitive Capacity Constraint and Attention Allocation in Human Decision Making

Qi Wu; Tetsuya Shimokawa

doi:doi:10.11648/j.jfa.20221002.17

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Cognitive Capacity Constraint and Attention Allocation in Human Decision Making

Qi Wu, Tetsuya Shimokawa

Published in Journal of Finance and Accounting (Volume 10, Issue 2)

Received: 18 April 2022 Published: 20 April 2022

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Abstract

The Rational Inattention (RI) model has attracted attention in recent years as a promising candidate for modeling bounded rationality in the fields of decision making and game theory research. The model assumes that there is a cognitive cost (cost of information processing) that is proportional to the amount of mutual information obtained from signals, thereby making it possible to explain various phenomena observed in the market at a certain level. However, the RI model still lacks a sufficient cognitive foundation. In this study, we conducted an experiment to examine whether the cognitive costs and constraints on information processing, which are the assumptions of the Rational Inattention Model, are reasonable from the perspective of neuroeconomics using biometric data such as gaze information and brain responses. We adopted the sequential investment task with a view to applying it to finance. Our results showed that the stochastic choice rational inattention model fit the behavioral data of the present experiment, the larger the cognitive cost the more activated the brain regions involved in costly cognition, And the consistency between gaze information and the capacity constraint of the Kalman filter type model, as expected, when there is a lot of information, not all information can be processed, so more accurate decisions cannot be made.

Published in	Journal of Finance and Accounting (Volume 10, Issue 2)
DOI	10.11648/j.jfa.20221002.17
Page(s)	141-150
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2022. Published by Science Publishing Group

Keywords

Rational Inattention, Mutual Information, Experiment

References

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Qi Wu, Tetsuya Shimokawa. (2022). Cognitive Capacity Constraint and Attention Allocation in Human Decision Making. Journal of Finance and Accounting, 10(2), 141-150. https://doi.org/10.11648/j.jfa.20221002.17

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ACS Style

Qi Wu; Tetsuya Shimokawa. Cognitive Capacity Constraint and Attention Allocation in Human Decision Making. J. Finance Account. 2022, 10(2), 141-150. doi: 10.11648/j.jfa.20221002.17

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AMA Style

Qi Wu, Tetsuya Shimokawa. Cognitive Capacity Constraint and Attention Allocation in Human Decision Making. J Finance Account. 2022;10(2):141-150. doi: 10.11648/j.jfa.20221002.17

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@article{10.11648/j.jfa.20221002.17,
  author = {Qi Wu and Tetsuya Shimokawa},
  title = {Cognitive Capacity Constraint and Attention Allocation in Human Decision Making},
  journal = {Journal of Finance and Accounting},
  volume = {10},
  number = {2},
  pages = {141-150},
  doi = {10.11648/j.jfa.20221002.17},
  url = {https://doi.org/10.11648/j.jfa.20221002.17},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.jfa.20221002.17},
  abstract = {The Rational Inattention (RI) model has attracted attention in recent years as a promising candidate for modeling bounded rationality in the fields of decision making and game theory research. The model assumes that there is a cognitive cost (cost of information processing) that is proportional to the amount of mutual information obtained from signals, thereby making it possible to explain various phenomena observed in the market at a certain level. However, the RI model still lacks a sufficient cognitive foundation. In this study, we conducted an experiment to examine whether the cognitive costs and constraints on information processing, which are the assumptions of the Rational Inattention Model, are reasonable from the perspective of neuroeconomics using biometric data such as gaze information and brain responses. We adopted the sequential investment task with a view to applying it to finance. Our results showed that the stochastic choice rational inattention model fit the behavioral data of the present experiment, the larger the cognitive cost the more activated the brain regions involved in costly cognition, And the consistency between gaze information and the capacity constraint of the Kalman filter type model, as expected, when there is a lot of information, not all information can be processed, so more accurate decisions cannot be made.},
 year = {2022}
}

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TY  - JOUR
T1  - Cognitive Capacity Constraint and Attention Allocation in Human Decision Making
AU  - Qi Wu
AU  - Tetsuya Shimokawa
Y1  - 2022/04/20
PY  - 2022
N1  - https://doi.org/10.11648/j.jfa.20221002.17
DO  - 10.11648/j.jfa.20221002.17
T2  - Journal of Finance and Accounting
JF  - Journal of Finance and Accounting
JO  - Journal of Finance and Accounting
SP  - 141
EP  - 150
PB  - Science Publishing Group
SN  - 2330-7323
UR  - https://doi.org/10.11648/j.jfa.20221002.17
AB  - The Rational Inattention (RI) model has attracted attention in recent years as a promising candidate for modeling bounded rationality in the fields of decision making and game theory research. The model assumes that there is a cognitive cost (cost of information processing) that is proportional to the amount of mutual information obtained from signals, thereby making it possible to explain various phenomena observed in the market at a certain level. However, the RI model still lacks a sufficient cognitive foundation. In this study, we conducted an experiment to examine whether the cognitive costs and constraints on information processing, which are the assumptions of the Rational Inattention Model, are reasonable from the perspective of neuroeconomics using biometric data such as gaze information and brain responses. We adopted the sequential investment task with a view to applying it to finance. Our results showed that the stochastic choice rational inattention model fit the behavioral data of the present experiment, the larger the cognitive cost the more activated the brain regions involved in costly cognition, And the consistency between gaze information and the capacity constraint of the Kalman filter type model, as expected, when there is a lot of information, not all information can be processed, so more accurate decisions cannot be made.
VL  - 10
IS  - 2
ER  -

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Author Information

Qi Wu

Graduate School of Management, Tokyo University of Science, Tokyo, Japan
Tetsuya Shimokawa

Department of Business Economics, Tokyo University of Science, Tokyo, Japan

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APA Style

Qi Wu, Tetsuya Shimokawa. (2022). Cognitive Capacity Constraint and Attention Allocation in Human Decision Making. Journal of Finance and Accounting, 10(2), 141-150. https://doi.org/10.11648/j.jfa.20221002.17

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ACS Style

Qi Wu; Tetsuya Shimokawa. Cognitive Capacity Constraint and Attention Allocation in Human Decision Making. J. Finance Account. 2022, 10(2), 141-150. doi: 10.11648/j.jfa.20221002.17

Copy | Download

AMA Style

Qi Wu, Tetsuya Shimokawa. Cognitive Capacity Constraint and Attention Allocation in Human Decision Making. J Finance Account. 2022;10(2):141-150. doi: 10.11648/j.jfa.20221002.17

Copy | Download

@article{10.11648/j.jfa.20221002.17,
  author = {Qi Wu and Tetsuya Shimokawa},
  title = {Cognitive Capacity Constraint and Attention Allocation in Human Decision Making},
  journal = {Journal of Finance and Accounting},
  volume = {10},
  number = {2},
  pages = {141-150},
  doi = {10.11648/j.jfa.20221002.17},
  url = {https://doi.org/10.11648/j.jfa.20221002.17},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.jfa.20221002.17},
  abstract = {The Rational Inattention (RI) model has attracted attention in recent years as a promising candidate for modeling bounded rationality in the fields of decision making and game theory research. The model assumes that there is a cognitive cost (cost of information processing) that is proportional to the amount of mutual information obtained from signals, thereby making it possible to explain various phenomena observed in the market at a certain level. However, the RI model still lacks a sufficient cognitive foundation. In this study, we conducted an experiment to examine whether the cognitive costs and constraints on information processing, which are the assumptions of the Rational Inattention Model, are reasonable from the perspective of neuroeconomics using biometric data such as gaze information and brain responses. We adopted the sequential investment task with a view to applying it to finance. Our results showed that the stochastic choice rational inattention model fit the behavioral data of the present experiment, the larger the cognitive cost the more activated the brain regions involved in costly cognition, And the consistency between gaze information and the capacity constraint of the Kalman filter type model, as expected, when there is a lot of information, not all information can be processed, so more accurate decisions cannot be made.},
 year = {2022}
}

Copy | Download

TY  - JOUR
T1  - Cognitive Capacity Constraint and Attention Allocation in Human Decision Making
AU  - Qi Wu
AU  - Tetsuya Shimokawa
Y1  - 2022/04/20
PY  - 2022
N1  - https://doi.org/10.11648/j.jfa.20221002.17
DO  - 10.11648/j.jfa.20221002.17
T2  - Journal of Finance and Accounting
JF  - Journal of Finance and Accounting
JO  - Journal of Finance and Accounting
SP  - 141
EP  - 150
PB  - Science Publishing Group
SN  - 2330-7323
UR  - https://doi.org/10.11648/j.jfa.20221002.17
AB  - The Rational Inattention (RI) model has attracted attention in recent years as a promising candidate for modeling bounded rationality in the fields of decision making and game theory research. The model assumes that there is a cognitive cost (cost of information processing) that is proportional to the amount of mutual information obtained from signals, thereby making it possible to explain various phenomena observed in the market at a certain level. However, the RI model still lacks a sufficient cognitive foundation. In this study, we conducted an experiment to examine whether the cognitive costs and constraints on information processing, which are the assumptions of the Rational Inattention Model, are reasonable from the perspective of neuroeconomics using biometric data such as gaze information and brain responses. We adopted the sequential investment task with a view to applying it to finance. Our results showed that the stochastic choice rational inattention model fit the behavioral data of the present experiment, the larger the cognitive cost the more activated the brain regions involved in costly cognition, And the consistency between gaze information and the capacity constraint of the Kalman filter type model, as expected, when there is a lot of information, not all information can be processed, so more accurate decisions cannot be made.
VL  - 10
IS  - 2
ER  -

Copy | Download