Choice-theoretic foundations of the divisive normalization model

Kai Steverson, Adam Brandenburger, Paul Glimcher

Research output: Contribution to journalArticle

Abstract

Recent advances in neuroscience suggest that a utility-like calculation is involved in how the brain makes choices, and that this calculation may use a computation known as divisive normalization. While this tells us how the brain makes choices, it is not immediately evident why the brain uses this computation or exactly what behavior is consistent with it. In this paper, we address both of these questions by proving a three-way equivalence theorem between the normalization model, an information-processing model, and an axiomatic characterization. The information-processing model views behavior as optimally balancing the expected value of the chosen object against the entropic cost of reducing stochasticity in choice. This provides an optimality rationale for why the brain may have evolved to use normalization-type models. The axiomatic characterization gives a set of testable behavioral statements equivalent to the normalization model. This answers what behavior arises from normalization. Our equivalence result unifies these three models into a single theory that answers the “how”, “why”, and “what” of choice behavior.

Original languageEnglish (US)
Pages (from-to)148-165
Number of pages18
JournalJournal of Economic Behavior and Organization
Volume164
DOIs
StatePublished - Aug 2019

ASJC Scopus subject areas

  • Economics and Econometrics
  • Organizational Behavior and Human Resource Management

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