Cognitive Uncertainty in Cost-Benefit Analysis: Integrating Behavioral Economics and Neuroeconomic Approaches to Model Preference Volatility

This research challenges the assumption that preferences are stable distributions by investigating how cognitive states, stress levels, and contextual factors cause preferences to fluctuate in ways traditional models miss. Drawing on behavioral economics and neuroscience, it hypothesizes that policy decisions under uncertainty are influenced by systematic cognitive biases varying by context, time pressure, and emotional state. The methodology combines laboratory economic game experiments with neuroimaging to measure brain activity correlating with preference formation under uncertainty, then develops computational models incorporating these cognitive dynamics into CBA. This approach explains why some policies with favorable cost-benefit ratios face opposition while others with weaker economic justifications gain support. It aims to generate "cognitive-adjusted" cost-benefit ratios accounting for preference volatility, improving policy evaluation from public perception and valuation perspectives.

References:

1. Illustration of a Method to Incorporate Preference Uncertainty in Benefit–Cost Analysis. Sunhee Baik, Alexander L. Davis, M. Granger Morgan (2019). Risk Analysis.