Proceedings of the Annual Meeting of the Cognitive Science Society

Cognitive processes underlie economic relations. In this paper, we develop a conceptual, mathematical, and computational framework for modeling market exchange as a series of dynamically interacting cognitive processes. Specifically, we show how advertisers can build trust and gain confidence in their pricing power to the point that they erode trust and undermine the efficacy of their advertising. Customers conversely orient towards advertisers seeking information or turn away from them as unreliable communicators. These behaviors and the patterns they generate occur inside a state space of unallocated perceived value. They constitute a small subset of the full range of possible strategic and adaptive responses that define cognitive microeconomics.