Motivated False Memory Soo Hong Chew∗ Wei Huangy Xiaojian Zhaoz This Version: March 2018 Abstract People often forget and sometimes fantasize. This paper reports a large-scale experiment on memory errors and their relation to preferential traits includ- ing time preference, attitudes toward risk and ambiguity, and psychological traits including anticipatory feelings. We observe systematic incidences of false memory in favor of positive events and selective amnesia in forgetting negative events. Intriguingly, both positive delusion and positive confabulation signifi- cantly relate to present bias, but this is not the case for positive amnesia. In an intra-person, multiple-self model, we demonstrate that positive false memory, rather than selective amnesia, serves to enhance confidence in one's future self in equilibrium, thereby accounting for our empirical findings. Keywords: false memory, amnesia, delusion, confabulation, present bias, an- ticipatory utility. JEL Classification: C91, D03, D83, Z13 ∗Department of Economics and Department of Finance, National University of Singapore (
[email protected]). yDepartment of Mathematical Economics and Mathematical Finance, Wuhan University (whuang
[email protected]). zChinese University of Hong Kong (Shenzhen) and Hong Kong University of Science and Tech- nology (
[email protected]). When false is taken for true, true becomes false; If non-being turns into being, being becomes non-being. Dream of the Red Chamber (Translated by Yang Xianyi and Gladys Yang). 1 Introduction People often forget and sometimes fantasize. They remember what they need or what they want to remember, and hold positive self-views or rosy world-views. It is impor- tant to investigate motivated false memory from an economics perspective (Benabou and Tirole, 2016).