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Memory and Anticipation

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Author Info

  • B. Douglas Bernheim
  • Raphael Thomadsen

Abstract

The introduction of memory imperfections into models of economic decision making creates a natural role for anticipatory emotions. Their combination has striking behavioural implications. The paper first shows that agents can rationally select apparently dominated strategies. We consider Newcomb's Paradox and the Prisoners' Dilemma. We provide a resolution for Newcomb's Paradox and argue it requires the decision maker to ascribe only a tiny weight to anticipatory emotions. For some ranges of parameters, it is possible to obtain cooperation in the Prisoners' Dilemma with probability arbitrarily close to unity. The second half of the paper provides a theory of reminders. Copyright 2005 Royal Economic Society.

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Bibliographic Info

Article provided by Royal Economic Society in its journal The Economic Journal.

Volume (Year): 115 (2005)
Issue (Month): 503 (04)
Pages: 271-304

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Handle: RePEc:ecj:econjl:v:115:y:2005:i:503:p:271-304

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Cited by:
  1. Reis, Ricardo, 2005. "Inattentive Consumers," CEPR Discussion Papers 5053, C.E.P.R. Discussion Papers.
  2. John Smith, 2007. "Cognitive Dissonance, Imperfect Memory and the Preference for Increasing Payments," Departmental Working Papers 200705, Rutgers University, Department of Economics.
  3. Chen, Si, 2012. "Optimistic versus Pessimistic--Optimal Judgemental Bias with Reference Point," MPRA Paper 50693, University Library of Munich, Germany.
  4. Page, Lionel & Page, Katie, 2010. "Last shall be first: A field study of biases in sequential performance evaluation on the Idol series," Journal of Economic Behavior & Organization, Elsevier, vol. 73(2), pages 186-198, February.
  5. Adriani, Fabrizio & Sonderegger, Silvia, 2009. "Why do parents socialize their children to behave pro-socially? An information-based theory," MPRA Paper 16107, University Library of Munich, Germany.
  6. John Smith, 2009. "Imperfect Memory and the Preference for Increasing Payments," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 165(4), pages 684-700, December.
  7. Dag Sommervoll, 2013. "Sweet self-deception," Journal of Economics, Springer, vol. 109(1), pages 73-88, May.

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