For instance, expected prices for fruit have an impact on growers planting decisions. Investment decisions implicitly or explicitly involve expectations about future prices, costs, yields, and a number of other factors. No doubt the past has a significant impact on most expectations for the future. However, exactly how individuals form their expectations is unknown. In addition, all individuals likely use somewhat different procedures.
People tend to have selective memories.
If a tractor recently broke down, they tend to overestimate the probability of a breakdown. Extreme events are sometimes remembered and given excessive weight in expectations. However, people who have not experienced a particular event, like the freeze of 1989, may underestimate the probability of that event. The recent past tends to be weighted more heavily than events occurring some time ago. This is part of the explanation for the hog and cattle cycles.