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Review of Economic Studies Vol. 92 No. 3 2025

Imagining the Future: Memory, Simulation, and Beliefs

Pedro Bordalo1; Giovanni Burro2; Katherine Coffman3; Nicola Gennaioli4; Andrei Shleifer5

1 University of Oxford, Oxford , · 2 Heidelberg University Alfred Weber Institute for Economics, Heidelberg , · 3 Harvard Business School, Harvard , · 4 Bocconi University and IGIER, Bocconi , · 5 Harvard University, Harvard ,

open access

Abstract

How do people form beliefs about novel risks, with which they have little or no experience? Motivated by survey data on beliefs about COVID we collected in 2020, we build a model based on the psychology of selective memory. When a person thinks about an event, different experiences compete for retrieval, and retrieved experiences are used to simulate the event based on how similar they are to it. The model predicts that different experiences interfere with each other in recall and that non-domain-specific experiences can bias beliefs based on their similarity to the assessed event. We test these predictions using data from our COVID survey and from a primed-recall experiment about cyberattack risk. In line with our theory of similarity-based retrieval and simulation, experiences and their measured similarity to the cued event help account for experience effects, priming effects, and the interaction of the two in shaping beliefs.

DOI
10.1093/restud/rdae070
Volume
92
Issue
3
Pages
1532-1563
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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