'Just Forget it' Memory Distortion as Bounded Rationality

IEW Working Paper No. 192

25 Pages Posted: 25 Jun 2004

Date Written: June 2004


Distortions in memory impose important bounds on rationality but have been largely disregarded in economics. While it is possible to learn, it is more difficult, and sometimes impossible, to unlearn. This retention effect lowers individual utility directly or via reduced productivity, and adds costs to principal-agent relationships. The imprinting effect states that the more one tries to forget a piece of information the more vivid it stays in memory, leading to a paradoxical outcome. The effects are based on, and are supported by, psychological experiments, and it is shown that they are relevant in many economic situations and beyond.

Keywords: Memory, bounded rationality, learning, retention, ironic process theory, principal agency

JEL Classification: D11, D83, J2, M20, Z00

Suggested Citation

Frey, Bruno S., 'Just Forget it' Memory Distortion as Bounded Rationality (June 2004). IEW Working Paper No. 192. Available at SSRN: https://ssrn.com/abstract=559428 or http://dx.doi.org/10.2139/ssrn.559428

Bruno S. Frey (Contact Author)

CREMA ( email )

Südstrasse 11
Zurich, CH 8008
+41 44 380 00 78 (Phone)

University of Basel ( email )

Peter Merian-Weg 6
Basel, 4002

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