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Updated: Feb 26, 2026
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The Joint Effect of Social Comparison and Social Distance on Evaluation of Intertemporal Choice Outcomes in Event-related Potential Studies
Published on: August 25, 2023
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Optimal decision making and matching are tied through diminishing returns
1Department of Neurobiology, Stanford University School of Medicine, Stanford, CA 94305 kubanek@stanford.edu.
Summary
Economic decision-making models assume optimal reward maximization. However, this study shows that the simpler "matching" strategy maximizes rewards when effort yields diminishing returns, explaining common choice behaviors in humans and animals.
Area of Science:
- Behavioral Economics
- Decision Science
- Life Sciences
Background:
- Economic models view decision-makers as optimal reward maximizers, requiring full knowledge of reward contingencies.
- Psychological and ecological observations suggest individuals often use a simpler "matching" strategy, allocating behavior proportionally to relative rewards.
Purpose of the Study:
- To demonstrate the link between optimal decision-making and the matching strategy through the law of diminishing returns.
- To explain why the matching law is prevalent in choice behavior across species.
Main Methods:
- Theoretical analysis linking economic and psychological choice frameworks.
- Examination of the law of diminishing returns in the context of reward saturation.
Main Results:
- The matching strategy can achieve maximal reward when rewards saturate with invested effort.
- This occurs under conditions characteristic of the law of diminishing returns.
Conclusions:
- The law of diminishing returns provides a unifying principle for understanding choice behavior.
- It explains the widespread adherence to the matching law in humans and animals.
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