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?Just Forget It?: Memory Distortion as Bounded Rationality

  • Bruno S. Frey

Distortions in memory impose important bounds on rationality but have been largely disregarded in economics. While it is possible to learn, it is more difficult, and sometimes impossible, to unlearn. This retention effect lowers individual utility directly or via reduced productivity, and adds costs to principal-agent relationships. The imprinting effect states that the more one tries to forget a piece of information the more vivid it stays in memory, leading to a paradoxical outcome. The effects are based on, and are supported by, psychological experiments, and it is shown that they are relevant in many economic situations and beyond.

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Paper provided by Center for Research in Economics, Management and the Arts (CREMA) in its series CREMA Working Paper Series with number 2005-01.

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Date of creation: Jun 2004
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Handle: RePEc:cra:wpaper:2005-01
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  1. Fehr, Ernst & Schmidt, Klaus M., 2004. "Fairness and Incentives in a Multi-Task Principal-Agent Model," Discussion Papers in Economics 335, University of Munich, Department of Economics.
  2. Fehr, Ernst & Fischbacher, Urs & von Rosenbladt, Bernhard & Schupp, Jürgen & Wagner, Gert G., 2003. "A Nation-Wide Laboratory: Examining Trust and Trustworthiness by Integrating Behavioral Experiments into Representative Surveys," IZA Discussion Papers 715, Institute for the Study of Labor (IZA).
  3. Hens, Thorsten & Mayer, Janós & Pilgrim, Beate, 2004. "Existence of Sunspot Equilibria and Uniqueness of Spot Market Equilibria: The Case of Intrinsically Complete Markets," Discussion Papers 2004/15, Department of Business and Management Science, Norwegian School of Economics.
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  6. Armin Falk & Urs Fischbacher & Simon Gächter, 2003. "Living in Two Neighborhoods – Social Interactions in the LAB," CESifo Working Paper Series 954, CESifo Group Munich.
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  8. Foellmi, Reto & Oechslin, Manuel, 2007. "Who gains from non-collusive corruption?," Journal of Development Economics, Elsevier, vol. 82(1), pages 95-119, January.
  9. Ernst Fehr & Joseph Henrich, 2003. "Is Strong Reciprocity a Maladaptation? On the Evolutionary Foundations of Human Altruism," CESifo Working Paper Series 859, CESifo Group Munich.
  10. Thorsten Hens & Klaus Reiner Schenk-Hoppé, 2002. "Markets Do Not Select For a Liquidity Preference as Behavior Towards Risk," Discussion Papers 02-18, University of Copenhagen. Department of Economics.
  11. Matthias Benz & Bruno S. Frey, 2008. "Being Independent is a Great Thing: Subjective Evaluations of Self-Employment and Hierarchy," Economica, London School of Economics and Political Science, vol. 75(298), pages 362-383, 05.
  12. Falk, Armin & Kosfeld, Michael, 2003. "It's All About Connections: Evidence on Network Formation," CEPR Discussion Papers 3970, C.E.P.R. Discussion Papers.
  13. C. Lanier Benkard, 2000. "Learning and Forgetting: The Dynamics of Aircraft Production," American Economic Review, American Economic Association, vol. 90(4), pages 1034-1054, September.
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