A Structural Estimable Model of Forgetting in Memory- Based Choice Decisions

and the seminar participants at the Business Economics Seminar Series at University of Toronto for their useful comments. The usual disclaimer applies. ABSTRACT We propose a structural model to investigate the impact of forgetting on consumers' brand choice decisions in frequently purchased products. Forgetting results in consumers imperfectly recalling their prior brand evaluations when making a purchase decision in the category. We conceptualize the imperfect recall by positing that the consumers recall their prior evaluations with an added noise. Based on the results of experimental work done on forgetting, we characterize the extent of forgetting as an increasing concave function of time. Our framework generates interesting analytical results on the impact of forgetting on consumers' brand evaluations and their consequent purchase behavior. We calibrate our model using scanner panel data for liquid detergents. Furthermore, we obtain interesting insights into the consumers' extent of forgetting in the category, the extent of learning, the predicted price elasticities and implications for state dependence and habit persistence.