Memory of Past Experiences and Economic Decisions

66 Pages Posted: 28 Jan 2022

See all articles by Ulrike Malmendier

Ulrike Malmendier

University of California, Berkeley - Department of Economics; University of California, Berkeley - Haas School of Business; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR); Institute for the Study of Labor (IZA)

Jessica A. Wachter

University of Pennsylvania - Finance Department; National Bureau of Economic Research (NBER)

Date Written: December 21, 2021

Abstract

In traditional economic models, memories of past experiences affect choices only to the extent that they represent information. We review recent advances in economic research that have introduced a role for long-lasting effects of personal past experiences and the memory thereof into economics. We first document the empirical evidence on long-lasting experience effects in finance and economics. We then discuss the main approaches the literature has taken in incorporating psychological theories of long-lasting memories into economics. Our treatment suggests a role for models of memory in accounting not only for micro-level phenomena, but for anomalies within asset pricing and macroeconomics more broadly.

JEL Classification: D91, E03, G02, G11, G12

Suggested Citation

Malmendier, Ulrike and Wachter, Jessica A., Memory of Past Experiences and Economic Decisions (December 21, 2021). Available at SSRN: https://ssrn.com/abstract=4013583 or http://dx.doi.org/10.2139/ssrn.4013583

Ulrike Malmendier

University of California, Berkeley - Department of Economics ( email )

549 Evans Hall #3880
Berkeley, CA 94720-3880
United States
(510) 642-8724 (Phone)
(510) 642-6615 (Fax)

HOME PAGE: http://www.econ.berkeley.edu/~ulrike/

University of California, Berkeley - Haas School of Business ( email )

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Berkeley, CA 94720
United States

National Bureau of Economic Research (NBER)

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Centre for Economic Policy Research (CEPR)

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Institute for the Study of Labor (IZA)

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Bonn, D-53072
Germany

HOME PAGE: http://www.iza.org/en/webcontent/personnel/photos/index_html?key=918

Jessica A. Wachter (Contact Author)

University of Pennsylvania - Finance Department ( email )

The Wharton School
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Philadelphia, PA 19104
United States
215-898-7634 (Phone)
215-898-6200 (Fax)

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

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