The role of memory in distinguishing risky decisions from experience and description

Madan, Christopher R.; Ludvig, Elliot A.; Spetch, Marcia L.

Abstract

People’s risk preferences differ for choices based on described probabilities versus those based on information learned through experience. For decisions from description, people are typically more risk averse for gains than for losses. In contrast, for decisions from experience, people are sometimes more risk seeking for gains than losses, especially for choices with the possibility of extreme outcomes (big wins or big losses), which are systematically overweighed in memory. Using a within-subject design, this study evaluated whether this memory bias plays a role in the differences in risky choice between description and experience. As in previous studies, people were more risk seeking for losses than for gains in description but showed the opposite pattern in experience. People also more readily remembered the extreme outcomes and judged them as having occurred more frequently. These memory biases correlated with risk preferences in decisions from experience but not in decisions from description. These results suggest that systematic memory biases may be responsible for some of the differences in risk preference across description and experience.

Citation

Madan, C. R., Ludvig, E. A., & Spetch, M. L. (in press). The role of memory in distinguishing risky decisions from experience and description. Quarterly Journal of Experimental Psychology, 70(10), https://doi.org/10.1080/17470218.2016.1220608

• Journal Article Type: Article
• Acceptance Date: Jul 28, 2016
• Online Publication Date: Sep 7, 2016
• Deposit Date: Jan 15, 2018
• Publicly Available Date: Jan 15, 2018
• Journal: Quarterly Journal of Experimental Psychology
• Print ISSN: 1747-0218
• Electronic ISSN: 1747-0226
• Publisher: SAGE Publications
• Peer Reviewed: Peer Reviewed
• Volume: 70
• Issue: 10
• DOI: https://doi.org/10.1080/17470218.2016.1220608
• Keywords: Decisions from description; Decisions from experience; Decision-making; Description–experience gap; Memory; Risky choice
• Public URL: https://nottingham-repository.worktribe.com/output/818767
• Publisher URL: http://www.tandfonline.com/doi/full/10.1080/17470218.2016.1220608
• Contract Date: Jan 15, 2018