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Testing the drift-diffusion model

D. Fudenberg,W. Newey,P. Strack,Tomasz Strzalecki

Published 2019 in Proceedings of the National Academy of Sciences of the United States of America

ABSTRACT

Significance The drift-diffusion model (DDM) has been widely used in psychology and neuroeconomics to explain observed patterns of choices and response times. This paper provides an identification and characterization theorems for this model: We show that the parameters are uniquely pinned down and determine which datasets are consistent with some form of DDM. We then develop a statistical test of the model based on finite datasets using spline estimation. These results establish the empirical content of the model and provide a way for researchers to see when it is applicable. The drift-diffusion model (DDM) is a model of sequential sampling with diffusion signals, where the decision maker accumulates evidence until the process hits either an upper or lower stopping boundary and then stops and chooses the alternative that corresponds to that boundary. In perceptual tasks, the drift of the process is related to which choice is objectively correct, whereas in consumption tasks, the drift is related to the relative appeal of the alternatives. The simplest version of the DDM assumes that the stopping boundaries are constant over time. More recently, a number of papers have used nonconstant boundaries to better fit the data. This paper provides a statistical test for DDMs with general, nonconstant boundaries. As a by-product, we show that the drift and the boundary are uniquely identified. We use our condition to nonparametrically estimate the drift and the boundary and construct a test statistic based on finite samples.

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