Memory, Beliefs, and Economic Decisions

Introduction

This project builds on the psychology of memory to study how selective retrieval affects economic decisions by shaping beliefs and preferences.

Core Beliefs and Preferences

The general approach is one in which a person’s past experiences (both domain relevant and domain irrelevant) determine her “core” beliefs and preferences. Changing cues in the environment ignite selective retrieval of specific pieces of information, causing instability in beliefs and preferences. In this way, selective memory acts as a source of framing effects.

Project Studies

1. Belief Formation
   One project studies belief formation, which is based on sampling of information shaped by similarity to cues (which include the hypotheses being assessed and irrelevant context) and by interference.

2. Preferences and Choices
   A second project applies this approach to preferences, studying:

   • Choice under risk (whereby people selectively retrieve from memory and simulate potential lottery outcomes)
   • Intertemporal choice (whereby people use memory to simulate future rewards)

3. Field Application
   A third project will apply these ideas to the field. Domains of interest are:

   • Survey measurement of how past domain relevant as well as domain irrelevant experiences shape the perception of new risks
   • Socio-economic identity and its effect on political opinions
   • Similarity in financial markets, beliefs, and asset prices
   • Advertising
   • Instability of fairness norms