Associative Memory and Belief Formation

Benjamin Enke, Frederik Schwerter and Florian Zimmermann

No 26664, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: D03 (search for similar items in EconPapers)
Date: 2020-01
New Economics Papers: this item is included in nep-evo, nep-exp and nep-neu
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Citations: View citations in EconPapers (36)

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Related works:
Working Paper: Associative Memory and Belief Formation (2020)
Working Paper: Associative Memory and Belief Formation (2019)
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