Selective Memory Equilibrium

53 Pages Posted: 28 Jan 2022 Last revised: 30 Sep 2023

See all articles by Drew Fudenberg

Drew Fudenberg

Massachusetts Institute of Technology (MIT)

Giacomo Lanzani

Massachusetts Institute of Technology (MIT) - Department of Economics; Harvard University

Philipp Strack

Yale, Department of Economics

Date Written: January 22, 2022

Abstract

We study agents who are more likely to remember some experiences than others but update beliefs as if the experiences they remember are the only ones that occurred. We show that if the agent’s behavior converges, their limit strategy is a \emph{selective memory equilibrium.} We illustrate how this new equilibrium concept can be used to understand the long-run effects of several well-documented memory biases. We then extend our analysis to cases where the expected number of recalled experiences is bounded. Here we characterize the long-run action frequencies that can arise.

Keywords: Memory, Learning, Underinference, Misspecification

Suggested Citation

Fudenberg, Drew and Lanzani, Giacomo and Strack, Philipp, Selective Memory Equilibrium (January 22, 2022). Available at SSRN: https://ssrn.com/abstract=4015313 or http://dx.doi.org/10.2139/ssrn.4015313

Drew Fudenberg

Massachusetts Institute of Technology (MIT) ( email )

77 Massachusetts Avenue
50 Memorial Drive
Cambridge, MA 02139-4307
United States

Giacomo Lanzani (Contact Author)

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

50 Memorial Drive
E52-391
Cambridge, MA 02142
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Harvard University ( email )

Littauer Center
Cambridge, MA 02138
United States
8578690771 (Phone)

Philipp Strack

Yale, Department of Economics ( email )

28 Hillhouse Ave
New Haven, CT 06520-8268
United States

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