Value computation and modulation: A neuroeconomic theory of self-control as constrained optimization

Abstract

We develop a theory based on the evidence reported in Hare et al. (2009) to explain consumption of goods that feature a low-order attribute (e.g., taste) and a high-order attribute (e.g., health). One brain system with access to the low-order attribute computes the goal value of consumption while another brain system can modulate this value, at a cost, by transmitting information regarding the high-order attribute. We determine the optimal modulation and consumption strategy as a function of the cost of information transmission and the environment. We show that in healthy environments, modulation is used to signal surprisingly unhealthy goods so as to trigger abstinence when consumption would ordinarily occur. Conversely, in unhealthy environments, modulation is used to signal surprisingly healthy choices so as to trigger consumption when abstinence would ordinarily occur. From an outside perspective, individuals may appear to under-regulate their choices (self-indulgence) but also to over-regulate them (self-restraint). Both modulation and decisions are affected by factors orthogonal to the decision problem. In particular, taxing executive functions results in less modulation and more inefficient behavior. Finally, the model can shed light on issues related to eating disorders, present-biased preferences, habit formation and compulsive behavior.