1. Time for Memorable Consumption
- Author
-
Andrei Savochkin, Stefania Minardi, Groupement de Recherche et d'Etudes en Gestion à HEC (GREGH), Ecole des Hautes Etudes Commerciales (HEC Paris)-Centre National de la Recherche Scientifique (CNRS), Collegio Carlo Alberto, Università degli studi di Torino = University of Turin (UNITO), HEC Research Paper Series, and Università degli studi di Torino (UNITO)
- Subjects
Consumption (economics) ,History ,Present value ,Polymers and Plastics ,Event (relativity) ,Markov process ,Duration neglect ,Industrial and Manufacturing Engineering ,Microeconomics ,symbols.namesake ,Computer Science::Hardware Architecture ,symbols ,Capital asset pricing model ,[SHS.GESTION]Humanities and Social Sciences/Business administration ,Special case ,Business and International Management ,Adaptation (computer science) - Abstract
A consumption event is memorable if the memory of it affects well-being at times after the material consumption. We develop an axiomatic model of memorable consumption in a dynamic setting. Preferences are represented by the present value of the sum of utilities derived at each date from the current consumption and from recollecting the past. Our model accommodates well-known phenomena in psychology, such as the peak-end rule, duration neglect, and adaptation trends. We provide foundations for a prominent special case of memory that has the Markovian property. The model is illustrated in application to life-cycle consumption-savings decisions and asset pricing.
- Published
- 2020