Imperfect Memory and Choice Under Risk

This paper presents a model of choice based on imperfect memory and self-deception. I assume that people have preferences over their own attributes (e.g., skill, knowledge, or competence) and can manipulate their memories. The model provides a prior-dependent theory of regret aversion and allows for prior-dependent information attitudes. It implies that behavior will converge to the one predicted by expected utility theory after a choice has been faced a sufficiently large number of times.