Memory, Expectation Formation and Scheduling Choices
Paul Koster (),
Stefanie Peer () and
Thijs Dekker ()
No 14-154/VIII, Tinbergen Institute Discussion Papers from Tinbergen Institute
This discussion paper led to a publication in 'Economics of Transportation'
. Limited memory capacity, retrieval constraints and anchoring are central to expectation formation processes. We develop a model of adaptive expectations where individuals are able to store only a finite number of past experiences of a stochastic state variable. Retrieval of these experiences is probabilistic and subject to error. We apply the model to scheduling choices of commuters and demonstrate that memory constraints lead to sub-optimal choices. We analytically and numerically show how memory-based adaptive expectations substantially increase commuters' willingness-to-pay for reductions in travel time variability, relative to the rational expectations outcome.
Keywords: Memory; Transience; Expectation formation; Adaptive expectations; Retrieval Accuracy; Scheduling; Value of Reliability (search for similar items in EconPapers)
JEL-codes: A12 D84 R41 (search for similar items in EconPapers)
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Journal Article: Memory, expectation formation and scheduling choices (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:tin:wpaper:20140154
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