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Associative Memory and Belief Formation

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  • Benjamin Enke
  • Frederik Schwerter
  • Florian Zimmermann

Abstract

Information is often embedded in memorable contexts, which may cue the asymmetric recall of similar past news through associative memory. We design a theory-driven experiment, in which participants observe signals about hypothetical companies. Here, identical signal realizations are communicated with identical contexts: stories and images. Because participants asymmetrically remember those past signals that get cued by the current context, beliefs systematically overreact. This overreaction depends in predictable ways on the signal history; the correlation between signals and contexts; and the scope for forgetting and associative memory. We quantify these results by structurally estimating a model of associative recall.

Suggested Citation

  • Benjamin Enke & Frederik Schwerter & Florian Zimmermann, 2020. "Associative Memory and Belief Formation," NBER Working Papers 26664, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:26664
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    References listed on IDEAS

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    1. Drew Fudenberg, 2006. "Advancing Beyond Advances in Behavioral Economics," Journal of Economic Literature, American Economic Association, vol. 44(3), pages 694-711, September.
    2. David Laibson, 2001. "A Cue-Theory of Consumption," The Quarterly Journal of Economics, Oxford University Press, vol. 116(1), pages 81-119.
    3. 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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    Cited by:

    1. Schwerter, Frederik & Zimmermann, Florian, 2020. "Determinants of trust: The role of personal experiences," Games and Economic Behavior, Elsevier, vol. 122(C), pages 413-425.
    2. Hagenbach, Jeanne & Koessler, Frédéric, 2021. "Selective memory of a psychological agent," Discussion Papers, Research Unit: Market Behavior SP II 2021-201, WZB Berlin Social Science Center.
    3. Jonas Radbruch & Amelie Schiprowski, 2020. "Interview Sequences and the Formation of Subjective Assessments," ECONtribute Discussion Papers Series 045, University of Bonn and University of Cologne, Germany.
    4. Eric Bettinger & Nina Cunha & Guilherme Lichand & Ricardo Madeira, 2020. "Are the effects of informational interventions driven by salience?," ECON - Working Papers 350, Department of Economics - University of Zurich, revised Feb 2021.

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    JEL classification:

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

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