This paper models how imperfect memory affects the optimal continuity of policies. We examine the choices of a player …, the player optimally responds to memory loss with excess inertia, defined as a higher probability of following old … more prone to follow new information signals). The model provides a memory-loss explanation for some documented …

Revealed preferences are tastes that rationalize an economic agent's observed actions. Normative preferences represent … the agent's actual interests. It sometimes makes sense to assume that revealed preferences are identical to normative … preferences. But there are many cases where this assumption is violated. We identify five factors that increase the likelihood of …