Time for Memorable Consumption

50 Pages Posted: 10 Oct 2019

See all articles by Stefania Minardi

Stefania Minardi

HEC Paris - Economics & Decision Sciences

Andrei Savochkin

New Economic School (NES)

Date Written: October 8, 2019

Abstract

A consumption event is memorable if the memory of it affects well-being at times after the material consumption. We develop an axiomatic model of memorable consumption in a dynamic setting. Preferences are represented by the present value of the sum of utilities derived at each date from the current consumption and from recollecting the past.

Our model accommodates well-known phenomena in psychology, such as the peak-end rule, duration neglect, and adaptation trends. We provide foundations for a prominent special case of memory that has the Markovian property. The model is illustrated in application to life-cycle consumption-savings decisions and asset pricing.

Suggested Citation

Minardi, Stefania and Savochkin, Andrei, Time for Memorable Consumption (October 8, 2019). HEC Paris Research Paper No. ECO/SCD-2019-1353. Available at SSRN: https://ssrn.com/abstract=3466759 or http://dx.doi.org/10.2139/ssrn.3466759

Stefania Minardi (Contact Author)

HEC Paris - Economics & Decision Sciences ( email )

Paris
France

Andrei Savochkin

New Economic School (NES) ( email )

100A Novaya Street
Moscow, Skolkovo 143026
Russia

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