Memory, Attention, and Choice*

Pedro Bordalo, Nicola Gennaioli and Andrei Shleifer

The Quarterly Journal of Economics, 2020, vol. 135, issue 3, 1399-1442

Abstract: Building on a textbook description of associative memory (Kahana 2012), we present a model of choice in which a choice option cues recall of similar past experiences. Memory shapes valuation and decisions in two ways. First, recalled experiences form a norm, which serves as an initial anchor for valuation. Second, salient quality and price surprises relative to the norm lead to large adjustments in valuation. The model unifies many well-documented choice puzzles, including the attribution and projection biases, inattention to hidden attributes, background contrast effects, and context-dependent willingness to pay. Unifying these puzzles on the basis of selective memory and attention to surprise yields multiple new predictions.

Date: 2020
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Related works:
Working Paper: Memory, Attention, and Choice (2017)
Working Paper: Memory, Attention, and Choice (2017)
Working Paper: Memory, Attention and Choice (2015)
Working Paper: Memory, Attention, and Choice (2015)
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