Rational memory with decay

Nathaniel Neligh

Journal of Economic Behavior & Organization, 2024, vol. 223, issue C, 120-145

Abstract: Historically, economic models of memory have neglected a pivotal aspect: decay, the established notion that memories deteriorate over time, resulting in a loss of fidelity. In this paper we show that a framework of rational memory with decay can produce the recency effect and other intuitively appealing memory phenomena. We apply the framework to both finite time and dynamic programming settings, deriving a wide range of results with a focus on comparative statics and asymptotic behaviors. Many of our results can also be applied to multi-dimensional rational inattention settings where individuals have to split their attention across several information sources.

Keywords: Memory; Imperfect information; Learning; Decision theory; Information theory (search for similar items in EconPapers)
JEL-codes: D83 D87 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:223:y:2024:i:c:p:120-145

DOI: 10.1016/j.jebo.2024.04.030

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