Rational Memory with Decay

Theory-Experimental Seminar

Nathaniel Neligh

University of Tennessee Knoxville

9-May-2022

webinar – 14:30

Previous economic models of memory have failed to incorporate one of its critical features: decay. It has long been established that memories fade over time, losing fidelity. In this paper we show that a framework of rational memory with decay can produce the recency effect and other economically interesting phenomena across a wide range of economic contexts. We apply the framework to models of elections, insurance purchasing, and advertising. In these settings, the framework reproduces empirically established behaviors and produces additional insights.