ECONtribute Webinar: Florian Zimmermann – Memory and Belief Formation

How does our memory shape the process of belief formation? We study the role of associative recall for belief formation and demonstrate that it can generate over- and underreaction to news.

Memory and Belief Formation: Information is often embedded in memorable contexts, which may cue the asymmetric recall of similar past news through associative memory. We design a theory-driven 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.

Prof. Dr. Florian Zimmermann (Institute on Behavior and Inequality (briq) and University of Bonn)
Moderator: Prof. Dr. Thomas Dohmen (ECONtribute and University of Bonn)

More information about Florian Zimmermann and his work.

The webinar was held on 22nd of April 2020. You can watch the recorded session below.