Imperfect recall, anchoring and scheduling decisions

Abstract

Standard economic models mostly assume rational expectations, often combined with the assumption that the memory of the decision makers is infinite. In this paper, we develop a stylized scheduling model that accommodates for more realistic properties of the decision maker: here, expectation formation is guided by imperfect recall and anchoring. We derive a closed-form expected utility function that accounts for the suboptimal expectation formation of the traveller and show analytically how costly deviations from rational expectations are.