How should a rational agent release information in order to manipulate the memory imperfections of his forgetful assessor? This question arises in a wide range of social and economic interactions, where agents are rewarded at some critical date on the basis of an assessment of their past performance. Often in such cases, an objective criterion that summarises past performance is not available and, as a result, the agents that provide the assessment (referred to as the assessors) have to rely on their memories of past events. For example, the election prospects of an incumbent politician depend on the electorate's memories on election day. In a labour market setting, promotion and bonus decisions depend on a supervisor's memories of an employee's past accomplishments. Similarly, the success of a new film on its opening weekend depends on the memorability of the advertising campaign prior to the film's release.
In this article I first borrow from the work of Mullainathan (2002) to model the assessors’ memory technology. I then explore the model's economic implications by addressing the issue of how a rational agent (politician/employee/advertiser) should time a sequence of informative events in order to manipulate the memories of his forgetful assessor (electorate/supervisor/consumer). I show that the agent's problem can be modelled as a standard dynamic optimisation problem, I describe the properties of the optimal profile for releasing information and we discuss the implications in the context of various applications. The main contribution of the article is, therefore, to show how a memory model similar to Mullainathan's (2002) can be fruitfully incorporated into standard decision problems to generate plausible and intuitive results that are relevant to a range of applications.1
To fix ideas, let us suppose that the agent is a politician facing an election at date T. During the period leading up to the election, the electorate observes events, both good and bad, that pertain to the politician. Events occur stochastically, but the politician also has some newsworthy items (referred to as successes) that he can release at his discretion. He can choose, for example, when to announce his commitment to cut taxes and when to schedule a TV appearance that will generate positive publicity. His objective is to maximise the memories that the electorate will have at election time, subject to the electorate's memory technology.
Following Mullainathan (2002) I assume that the electorate's memory is governed by the principles of recency, cue dependence and rehearsal. Recency refers to the obvious fact that time erodes memories. Hence, all else being equal, more recent events are more memorable. Cue dependence refers to the property that current events may trigger memories of similar past events. When the memory of an event is triggered by a similar current event, rehearsal kicks in by increasing the strength of the original (just triggered) memory.
In the context of the political application these principles give rise to two opposing forces. On the one hand, recency implies that the politician should release his successes close to the election date (recency effect). On the other hand, the combination of cue dependence and rehearsal implies that current information releases do not only create new memories for the future, but they can also make similar past memories more memorable. To use the economics jargon, there is a complementarity between current and past information releases, similar to the complementarity between current and past consumption in models of addiction or habit formation. From this point of view, the politician should release his successes, when these successes can most effectively rehearse past successes (rehearsal effect). If, for example, the politician has recently accumulated some favourable publicity due to exogenous stochastic events, the rehearsal effect will be maximised if the politician releases his successes as early as possible, while the existing memories of past successes are still fresh. Optimal decisions are dictated by a trade-off between the recency and the rehearsal effects.
The formal model considers the case where the politician has a fixed budget of newsworthy items to release. In the benchmark model, all of these newsworthy items and all stochastic events are favourable (good news) to the politician. It is shown that the optimal rule for when to release information has a nice simple form. Loosely speaking, we can think of a streak of events creating a rehearsal stock. When this stock is above a certain threshold level, it triggers the agent to release more successes. This way new successes reinforce the memories of past successes while these memories are still fresh. Moreover, I show that in the optimal profile successes should be bunched together in consecutive periods. This implies that once the agent starts releasing newsworthy items, he continues doing so until he exhausts his supply of such items.
These results are relevant for political campaigns, advertising strategies and evaluations at the workplace, to mention a few. A politician, for example, should release favourable events immediately following a streak of favourable press releases (threshold result). An advertiser should schedule commercial spots addressing different attributes of the same brand back to back in consecutive time slots (bunching result).
The bunching result has some support in the experimental evidence found in the marketing literature. A series of experiments has addressed the issue of whether memory is superior for bunched rather than for spaced presentations of similar or identical information.2Janiszewski (2002) shows that, for presentations of similar information (e.g. different commercial spots each addressing a different attribute of the same product), recall is superior when the target stimulus is presented in a bunched format.
I also extend the model to allow for the presence of bad news (failures), i.e. events which are harmful to the agent's image. The earlier results continue to hold true, but some new insights also emerge. Now, there is also a rehearsal stock for failures and this means that successes serve two purposes. They rehearse past successes, as before, but they also guarantee that past failures will not be reinforced by a potential failure. The higher the rehearsal stock for failures, the more eager will the politician be to avoid a failure and, hence, the more eager will he be to deplete his budget and release a success. In the special case where all events are good or bad, i.e. there are no neutral events, we show that the benefit from avoiding a failure is symmetric to the benefit from releasing a success and optimal decisions depend only on the sum of the two (one for successes, one for failures) rehearsal stocks.