Selective Memory Equilibrium

Abstract

When agents are more likely to remember some experiences than
others but update beliefs as if the experiences they remember are
the only ones that occurred, their limit strategy are selective memory equilibria.
We illustrate how selective memory equilibrium 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 and experiences that are recalled once are more likely to be
recalled again, and to agents who are only partially naive about their selective memory.

Keywords: Memory, Learning, Underinference, Misspecification