Cary D. Frydman

A critical component that is common to both economic and perceptual decision-making under uncertainty is the belief formation process. However, most research has treated belief formation in economic and perceptual decision-making as separate processes. One reason for this separate treatment may be the assumption that there are distinct psychological mechanisms that underlie belief formation in economic and perceptual decisions. An alternative theory is that there exists a common computational model that describes belief formation in both domains. Here, we test this alternative theory by combining a novel computational modeling technique with two well-known experimental paradigms. We estimate a drift-diffusion model (DDM) and provide an analytical method to decode prior beliefs from DDM parameters. We find that a common computational model explains belief formation in both tasks, and that individual differences in belief formation are correlated across tasks. We conclude by discussing implications for understanding judgment biases and predictions in finance.