Memory, Expectation Formation and Scheduling Choices

Arbeitspapier

Limited memory capacity, retrieval constraints and anchoring are central to expectation formation processes. We develop a model of adaptive expectations where individuals are able to store only a finite number of past experiences of a stochastic state variable. Retrieval of these experiences is probabilistic and subject to error. We apply the model to scheduling choices of commuters and demonstrate that memory constraints lead to sub-optimal choices. We analytically and numerically show how memory-based adaptive expectations substantially increase commuters' willingness-to-pay for reductions in travel time variability, relative to the rational expectations outcome.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Tinbergen Institute Discussion Paper ; No. 14-154/VIII

Classification and Topics

• Classification: Wirtschaft ; Relation of Economics to Other Disciplines ; Expectations; Speculations ; Transportation: Demand, Supply, and Congestion; Travel Time; Safety and Accidents; Transportation Noise
• Subject: Memory ; Transience ; Expectation formation ; Adaptive expectations ; Retrieval Accuracy ; Scheduling ; Value of Reliability

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Koster, Paul ; Peer, Stefanie ; Dekker, Thijs
• Event: Veröffentlichung
• (who): Tinbergen Institute
• (where): Amsterdam and Rotterdam
• (when): 2014

Further information

• Handle: http://hdl.handle.net/10419/107866
• Last update: 10.03.2025, 11:43 AM CET