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Memory, Attention, and Choice

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  • Pedro Bordalo
  • Nicola Gennaioli
  • Andrei Shleifer

Abstract

Building on a textbook description of associative memory (Kahana 2012), we present a model of choice in which a choice option cues recall of similar past experiences. Memory shapes valuation and decisions in two ways. First, recalled experiences form a norm, which serves as an initial anchor for valuation. Second, salient quality and price surprises relative to the norm lead to large adjustments in valuation. The model unifies many well-documented choice puzzles, including the attribution and projection biases, inattention to hidden attributes, background contrast effects, and context-dependent willingness to pay. Unifying these puzzles on the basis of selective memory and attention to surprise yields multiple new predictions.

Suggested Citation

  • Pedro Bordalo & Nicola Gennaioli & Andrei Shleifer, 2020. "Memory, Attention, and Choice," The Quarterly Journal of Economics, Oxford University Press, vol. 135(3), pages 1399-1442.
  • Handle: RePEc:oup:qjecon:v:135:y:2020:i:3:p:1399-1442.
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    File URL: http://hdl.handle.net/10.1093/qje/qjaa007
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    References listed on IDEAS

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    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles

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