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Time for Memorable Consumption

Author

Listed:
  • Stefania Minardi

    (GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - HEC Paris - Ecole des Hautes Etudes Commerciales - CNRS - Centre National de la Recherche Scientifique)

  • Andrei Savochkin

    (Collegio Carlo Alberto - UNITO - Università degli studi di Torino = University of Turin)

Abstract

A consumption event is memorable if the memory of it affects well-being at times after the material consumption. We develop an axiomatic model of memorable consumption in a dynamic setting. Preferences are represented by the present value of the sum of utilities derived at each date from the current consumption and from recollecting the past. Our model accommodates well-known phenomena in psychology, such as the peak-end rule, duration neglect, and adaptation trends. We provide foundations for a prominent special case of memory that has the Markovian property. The model is illustrated in application to life-cycle consumption-savings decisions and asset pricing.

Suggested Citation

  • Stefania Minardi & Andrei Savochkin, 2020. "Time for Memorable Consumption," Working Papers hal-02896528, HAL.
    • Handle: RePEc:hal:wpaper:hal-02896528
    DOI: 10.2139/ssrn.3466759
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    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory

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