Center for Foundations of Economic Preferences (FEP)

Knowledge about preferences is key for the ability to predict the behavior of individuals and groups, and for assessing the welfare consequences of different policies. However, large empirical gaps in our knowledge about preferences still remain.

The research center “Foundations of Economic Preferences (FEP)” measures structural preference parameters and the social and biological forces that shape them by applying economic and neuroeconomic tools. In particular, we study the following four topics:

1. The distribution and stability of time, risk, and social preferences
2. The relationship between time, risk, and social preferences
3. The causal impact of the social environment on preferences
4. The neural and genetic determinants of preferences.

We initiate a unique panel data set based on conducting behavioral experiments with a nationally representative subject pool at several points in time. This enables us to characterize the countrywide distribution of structurally estimated individual preference parameters in the domain of time, risk, and social preferences. We also conduct experiments to examine the causal impact of social factors such as educational intervention, stress and relative income shocks, subjects’ “historical” experiences, and war and inter-group conflicts on preferences. We bridge the behavioral and the brain sciences by providing an empirically constrained computational model of the brain’s valuation circuitry that can predict experimentally observed behavior trial by trial. This enables us to understand how neural networks in the human brain, and the associated neural computations, determine our choices, as well as how specific genes are related to economic choice and to neural activations in the brain.