Cost-Benefit Analysis in Reasoning

Forthcoming

Authors: Larbi Alaoui and Antonio Penta

Journal of Political Economy

An individual’s decision to reason about a problem may involve a trade-off between cognitive costs and a notion of value. This paper analyzes the primitive properties that must hold for the decision to stop thinking to be represented by a cost-benefit analysis. We then provide additional properties that give more structure to the value of reasoning function. We show how our model applies to a variety of settings, including contexts involving R&D applications, response time, and strategic reasoning. Our model can also be used to understand patterns of behavior for which the cost-benefit approach does not seem to hold.