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Role of Forgetting in Memory-Based Choice Decisions: A Structural Model

Author

Listed:
  • Nitin Mehta

    ()

  • Surendra Rajiv

    ()

  • Kannan Srinivasan

    ()

Abstract

We propose a structural model to investigate the impact of forgetting on consumers' brand choice decisions in frequently purchased products. Forgetting results in consumers imperfectly recalling their prior brand evaluations when making a purchase decision in the category. We conceptualize the imperfect recall by positing that consumers recall their prior evaluations with noise. Based on prior research in the behavioral area, we characterize the extent of forgetting as an increasing and concave function of time. Our framework generates analytical results on the impact of forgetting on consumers' brand evaluations and their consequent purchase behavior. We calibrate our model using scanner panel data for liquid detergents. Furthermore, we obtain insights into the consumers' extent of forgetting in the category, extent of learning, predicted price elasticities and implications on state dependence and habit persistence. Our results underscore the importance of modeling consumers' ability to recall only imperfectly. Copyright Kluwer Academic Publishers 2004

Suggested Citation

  • Nitin Mehta & Surendra Rajiv & Kannan Srinivasan, 2004. "Role of Forgetting in Memory-Based Choice Decisions: A Structural Model," Quantitative Marketing and Economics (QME), Springer, vol. 2(2), pages 107-140, June.
  • Handle: RePEc:kap:qmktec:v:2:y:2004:i:2:p:107-140
    DOI: 10.1023/B:QMEC.0000027775.65062.50
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    References listed on IDEAS

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    1. Lynch, John G, Jr & Marmorstein, Howard & Weigold, Michael F, 1988. " Choices from Sets Including Remembered Brands: Use of Recalled Attributes and Prior Overall Evaluations," Journal of Consumer Research, Oxford University Press, vol. 15(2), pages 169-184, September.
    2. Nitin Mehta & Surendra Rajiv & Kannan Srinivasan, 2003. "Price Uncertainty and Consumer Search: A Structural Model of Consideration Set Formation," Marketing Science, INFORMS, vol. 22(1), pages 58-84, June.
    3. Miller, Robert A, 1984. "Job Matching and Occupational Choice," Journal of Political Economy, University of Chicago Press, vol. 92(6), pages 1086-1120, December.
    4. Biehal, Gabriel & Chakravarti, Dipankar, 1983. " Information Accessibility as a Moderator of Consumer Choice," Journal of Consumer Research, Oxford University Press, vol. 10(1), pages 1-14, June.
    5. Peter M. Guadagni & John D. C. Little, 1983. "A Logit Model of Brand Choice Calibrated on Scanner Data," Marketing Science, INFORMS, vol. 2(3), pages 203-238.
    6. Tülin Erdem & Michael P. Keane, 1996. "Decision-Making Under Uncertainty: Capturing Dynamic Brand Choice Processes in Turbulent Consumer Goods Markets," Marketing Science, INFORMS, vol. 15(1), pages 1-20.
    7. Park, C Whan & Iyer, Easwar S & Smith, Daniel C, 1989. " The Effects of Situational Factors on In-Store Grocery Shopping Behavior: The Role of Store Environment and Time Available for Shopping," Journal of Consumer Research, Oxford University Press, vol. 15(4), pages 422-433, March.
    8. Sendhil Mullainathan, 2002. "A Memory-Based Model of Bounded Rationality," The Quarterly Journal of Economics, Oxford University Press, vol. 117(3), pages 735-774.
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    Citations

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    Cited by:

    1. Andrew Ching & Masakazu Ishihara, 2010. "The effects of detailing on prescribing decisions under quality uncertainty," Quantitative Marketing and Economics (QME), Springer, vol. 8(2), pages 123-165, June.
    2. Szymanowski, M.G., 2009. "Consumption-based learning about brand quality : Essays on how private labels share and borrow reputation," Other publications TiSEM b12825d8-5e21-4437-adda-b, Tilburg University, School of Economics and Management.
    3. Brett R. Gordon, 2009. "A Dynamic Model of Consumer Replacement Cycles in the PC Processor Industry," Marketing Science, INFORMS, vol. 28(5), pages 846-867, 09-10.
    4. Sofia Berto Villas-Boas & J. Miguel Villas-Boas, 2008. "Learning, Forgetting, and Sales," Management Science, INFORMS, vol. 54(11), pages 1951-1960, November.
    5. Yilmaz Kocer, 2010. "Endogenous Learning with Bounded Memory," Working Papers 1290, Princeton University, Department of Economics, Econometric Research Program..
    6. Nuno Camacho & Bas Donkers & Stefan Stremersch, 2011. "Predictably Non-Bayesian: Quantifying Salience Effects in Physician Learning About Drug Quality," Marketing Science, INFORMS, vol. 30(2), pages 305-320, 03-04.
    7. Yuxin Chen & Ganesh Iyer & Amit Pazgal, 2010. "Limited Memory, Categorization, and Competition," Marketing Science, INFORMS, vol. 29(4), pages 650-670, 07-08.
    8. Peter Stüttgen & Peter Boatwright & Robert T. Monroe, 2012. "A Satisficing Choice Model," Marketing Science, INFORMS, vol. 31(6), pages 878-899, November.
    9. Cleeren, K. & Dekimpe, M.G. & Helsen, K., 2008. "Weathering product-harm crises," Other publications TiSEM 283b51f8-dd35-4a10-930a-8, Tilburg University, School of Economics and Management.
    10. repec:eee:ijrema:v:34:y:2017:i:3:p:694-716 is not listed on IDEAS
    11. Raphael Thomadsen & Pradeep Bhardwaj, 2011. "Cooperation in Games with Forgetfulness," Management Science, INFORMS, vol. 57(2), pages 363-375, February.
    12. Sangwoo Shin & Sanjog Misra & Dan Horsky, 2012. "Disentangling Preferences and Learning in Brand Choice Models," Marketing Science, INFORMS, vol. 31(1), pages 115-137, January.
    13. repec:eee:ijrema:v:30:y:2013:i:3:p:219-235 is not listed on IDEAS
    14. repec:eee:jouret:v:88:y:2012:i:1:p:88-101 is not listed on IDEAS
    15. Ching, Andrew & Ishihara, Masakazu, 2007. "The Effects of Detailing on Prescribing Decisions under Two-Sided Learning," MPRA Paper 4935, University Library of Munich, Germany.

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