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Memory and Anticipation

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  • 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.

Suggested Citation

  • B. Douglas Bernheim & Raphael Thomadsen, 2005. "Memory and Anticipation," Economic Journal, Royal Economic Society, vol. 115(503), pages 271-304, April.
  • Handle: RePEc:ecj:econjl:v:115:y:2005:i:503:p:271-304
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    Citations

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    Cited by:

    1. Dag Sommervoll, 2013. "Sweet self-deception," Journal of Economics, Springer, vol. 109(1), pages 73-88, May.
    2. Brocas, Isabelle & Carrillo, Juan D., 2016. "A neuroeconomic theory of memory retrieval," Journal of Economic Behavior & Organization, Elsevier, vol. 130(C), pages 198-205.
    3. Reis, Ricardo, 2006. "Inattentive consumers," Journal of Monetary Economics, Elsevier, vol. 53(8), pages 1761-1800, November.
    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. repec:mhr:jinste:urn:sici:0932-4569(201612)172:4_727:beocra_2.0.tx_2-v is not listed on IDEAS
    6. Yilmaz Kocer, 2010. "Endogenous Learning with Bounded Memory," Working Papers 1290, Princeton University, Department of Economics, Econometric Research Program..
    7. Adriani, Fabrizio & Sonderegger, Silvia, 2009. "Why do parents socialize their children to behave pro-socially? An information-based theory," Journal of Public Economics, Elsevier, vol. 93(11-12), pages 1119-1124, December.
    8. Koster, Paul & Peer, Stefanie & Dekker, Thijs, 2015. "Memory, expectation formation and scheduling choices," Economics of Transportation, Elsevier, vol. 4(4), pages 256-265.
    9. Charlotte Saucet & Marie Villeval, 2018. "Motivated Memory in Dictator Games," Working Papers halshs-01781335, HAL.
    10. Macera, Rosario, 2014. "Dynamic beliefs," Games and Economic Behavior, Elsevier, vol. 87(C), pages 1-18.
    11. Gottlieb, Daniel, 2014. "Imperfect memory and choice under risk," Games and Economic Behavior, Elsevier, vol. 85(C), pages 127-158.
    12. Chen, Si, 2012. "Optimistic versus Pessimistic--Optimal Judgemental Bias with Reference Point," MPRA Paper 50693, University Library of Munich, Germany.
    13. 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.
    14. Krumer, Alex & Lechner, Michael, 2016. "Midweek Effect on Performance: Evidence from the German Soccer Bundesliga," Economics Working Paper Series 1609, University of St. Gallen, School of Economics and Political Science.
    15. John Smith, 2007. "Cognitive Dissonance, Imperfect Memory and the Preference for Increasing Payments," Departmental Working Papers 200705, Rutgers University, Department of Economics.
    16. Saori Chiba & Kaiwen Leong, 2016. "Behavioral Economics of Crime Rates and Punishment Levels," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 172(4), pages 727-754, December.

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