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Associative Memory and Belief Formation

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  • Benjamin Enke
  • Frederik Schwerter
  • Florian Zimmermann

Abstract

Information is often embedded in memorable contexts, which may cue the asymmetric recall of similar past news through associative memory. We design a theorydriven experiment, in which participants observe signals about hypothetical companies. Here, identical signal realizations are communicated with identical contexts: stories and images. Because participants asymmetrically remember those past signals that get cued by the current context, beliefs systematically overreact. This overreaction depends in predictable ways on the signal history; the correlation between signals and contexts; and the scope for forgetting and associative memory. We quantify these results by structurally estimating a model of associative recall.

Suggested Citation

  • Benjamin Enke & Frederik Schwerter & Florian Zimmermann, 2020. "Associative Memory and Belief Formation," CRC TR 224 Discussion Paper Series crctr224_2020_148, University of Bonn and University of Mannheim, Germany.
    • Handle: RePEc:bon:boncrc:crctr224_2020_148
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    File URL: https://www.crctr224.de/research/discussion-papers/archive/dp148
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    References listed on IDEAS

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    6. Hagenbach, Jeanne & Koessler, Frédéric, 2022. "Selective memory of a psychological agent," European Economic Review, Elsevier, vol. 142(C).
    7. Katherine Coffman & Maria Paola Ugalde Araya & Basit Zafar, 2024. "A (dynamic) investigation of stereotypes, belief‐updating, and behavior," Economic Inquiry, Western Economic Association International, vol. 62(3), pages 957-983, July.
    8. Abel, Martin & Burger, Rulof, 2023. "Unpacking Name-Based Race Discrimination," IZA Discussion Papers 16254, Institute of Labor Economics (IZA).
    9. Michael Weber & Francesco D'Acunto & Yuriy Gorodnichenko & Olivier Coibion, 2022. "The Subjective Inflation Expectations of Households and Firms: Measurement, Determinants, and Implications," Journal of Economic Perspectives, American Economic Association, vol. 36(3), pages 157-184, Summer.
    10. Fedyk, Anastassia & Hodson, James, 2023. "When can the market identify old news?," Journal of Financial Economics, Elsevier, vol. 149(1), pages 92-113.
    11. Botond Kőszegi & George Loewenstein & Takeshi Murooka, 2022. "Fragile Self-Esteem," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 89(4), pages 2026-2060.
    12. Schwerter, Frederik & Zimmermann, Florian, 2020. "Determinants of trust: The role of personal experiences," Games and Economic Behavior, Elsevier, vol. 122(C), pages 413-425.
    13. Xie, Erhao, 2021. "Empirical properties and identification of adaptive learning models in behavioral game theory," Journal of Economic Behavior & Organization, Elsevier, vol. 191(C), pages 798-821.
    14. Eric Bettinger & Nina Cunha & Guilherme Lichand & Ricardo Madeira, 2020. "Are the effects of informational interventions driven by salience?," ECON - Working Papers 350, Department of Economics - University of Zurich, revised May 2021.
    15. George Loewenstein & Zachary Wojtowicz, 2023. "The Economics of Attention," CESifo Working Paper Series 10712, CESifo.
    16. Adloff, Susann, 2021. "Adapting to Climate Change: Threat Experience, Cognition and Protection Motivation," VfS Annual Conference 2021 (Virtual Conference): Climate Economics 242400, Verein für Socialpolitik / German Economic Association.
    17. Pedro Bordalo & Giovanni Burro & Katherine B. Coffman & Nicola Gennaioli & Andrei Shleifer, 2022. "Imagining the Future: Memory, Simulation and Beliefs about Covid," NBER Working Papers 30353, National Bureau of Economic Research, Inc.
    18. Burdea, Valeria & Woon, Jonathan, 2022. "Online belief elicitation methods," Journal of Economic Psychology, Elsevier, vol. 90(C).
    19. Belot, Michèle & Schröder, Marina, 2023. "Remember me? The role of gender and racial attributes in memory," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 104(C).
    20. Gleue, Marvin & Harrs, Sören & Feldhaus, Christoph & Löschel, Andreas, 2024. "Identity and voluntary efforts for climate protection," Journal of Economic Behavior & Organization, Elsevier, vol. 221(C), pages 436-476.
    21. Jeffrey, Karen & Matakos, Konstantinos, 2024. "Automation anxiety, fairness perceptions, and redistribution: Past experiences condition the response to future job loss," Journal of Economic Behavior & Organization, Elsevier, vol. 221(C), pages 174-190.
    22. Castagnetti, Alessandro & Schmacker, Renke, 2022. "Protecting the ego: Motivated information selection and updating," European Economic Review, Elsevier, vol. 142(C).
    23. Angelico, Cristina, 2024. "The green transition and firms' expectations on future prices: Survey evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 221(C), pages 519-543.
    24. Bowen, T. Renee & Galperti, Simone & Dmitriev, Danil, 2021. "Learning from Shared News: When Abundant Information Leads to Belief Polarization," CEPR Discussion Papers 15789, C.E.P.R. Discussion Papers.
    25. Caballero, Adrián & López-Pérez, Raúl, 2022. "Heterogeneous primacy and recency effects in frequency estimation," Journal of Economic Behavior & Organization, Elsevier, vol. 200(C), pages 182-203.

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    More about this item

    Keywords

    Beliefs; expectations; memory; bounded rationality;
    All these keywords.

    JEL classification:

    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles

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