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Memory, Attention, and Choice*
Author(s) -
Pedro Bordalo,
Nicola Gennaioli,
Andrei Shleifer
Publication year - 2020
Publication title -
the quarterly journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 34.573
H-Index - 259
eISSN - 1531-4650
pISSN - 0033-5533
DOI - 10.1093/qje/qjaa007
Subject(s) - valuation (finance) , surprise , cognitive psychology , salient , recall , associative property , psychology , heuristics , computer science , social psychology , economics , artificial intelligence , mathematics , operating system , finance , pure mathematics
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.

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