Summary
Beliefs and expectations play a major role in economic analysis. In the proposed research, I seek to advance our empirical understanding of belief and expectation formation processes by incorporating memory patterns. Intuitively, memory plays a crucial role in the process of belief formation and the evolution of belief distortions, as large parts of the information used when forming beliefs is retrieved from memory. While recent theoretical work has begun to recognize the important role of memory for belief formation, empirical research is virtually non-existent. Accordingly, this research sets out to study the role of memory for belief formation in a set of key domains of behavioral economics. In parts 1a and 1b, I propose to study the role of associative recall in expectation formation. The principle of associative recall posits that current cues trigger the recall of past news that are mentally associated with the cue. Two central predictions that emerge from this principle are: (i) context-cued associative recall can lead to overreaction; (ii) context-cued associative recall can create belief spillovers. I plan to test both predictions in tailored lab experiments. In part 2a, I seek to study the implications of memory for reference-dependent behavior. Reference-dependent preferences are at the heart of many behavioral theories. Yet, the nature and determinants of reference points remains an open issue. I plan to experimentally study how memory shapes reference points. Memory patterns can endogenize the reference point and will deliver precise conditions as to when reference points can be expected to be determined by rational expectations, and when they are more likely to be backward-looking. In the final part of this proposal, I plan to study a key puzzle in behavioral economics. Why are so many people naïve about their present bias? In this project, I propose to experimentally study the role (imperfect) memory plays in generating and maintaining naïveté.
Unfold all
/
Fold all
More information & hyperlinks
| Web resources: | https://cordis.europa.eu/project/id/948424 |
| Start date: | 01-12-2020 |
| End date: | 30-11-2025 |
| Total budget - Public funding: | 1 279 361,00 Euro - 1 279 361,00 Euro |
Cordis data
Original description
Beliefs and expectations play a major role in economic analysis. In the proposed research, I seek to advance our empirical understanding of belief and expectation formation processes by incorporating memory patterns. Intuitively, memory plays a crucial role in the process of belief formation and the evolution of belief distortions, as large parts of the information used when forming beliefs is retrieved from memory. While recent theoretical work has begun to recognize the important role of memory for belief formation, empirical research is virtually non-existent. Accordingly, this research sets out to study the role of memory for belief formation in a set of key domains of behavioral economics. In parts 1a and 1b, I propose to study the role of associative recall in expectation formation. The principle of associative recall posits that current cues trigger the recall of past news that are mentally associated with the cue. Two central predictions that emerge from this principle are: (i) context-cued associative recall can lead to overreaction; (ii) context-cued associative recall can create belief spillovers. I plan to test both predictions in tailored lab experiments. In part 2a, I seek to study the implications of memory for reference-dependent behavior. Reference-dependent preferences are at the heart of many behavioral theories. Yet, the nature and determinants of reference points remains an open issue. I plan to experimentally study how memory shapes reference points. Memory patterns can endogenize the reference point and will deliver precise conditions as to when reference points can be expected to be determined by rational expectations, and when they are more likely to be backward-looking. In the final part of this proposal, I plan to study a key puzzle in behavioral economics. Why are so many people naïve about their present bias? In this project, I propose to experimentally study the role (imperfect) memory plays in generating and maintaining naïveté.Status
SIGNEDCall topic
ERC-2020-STGUpdate Date
27-04-2024
Images
No images available.
Geographical location(s)
