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Remembering the best and worst of times : memories for extreme outcomes bias risky decisions
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Madan, Christopher R., Ludvig, Elliot Andrew and Spetch, Marcia Louise (2014) Remembering the best and worst of times : memories for extreme outcomes bias risky decisions. Psychonomic Bulletin & Review . doi:10.3758/s13423-013-0542-9
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Official URL: http://dx.doi.org/10.3758/s13423-013-0542-9
Abstract
When making decisions on the basis of past experiences, people must rely on their memories. Human memory has many well-known biases, including the tendency to better remember highly salient events. We propose an extreme-outcome rule, whereby this memory bias leads people to overweight the largest gains and largest losses, leading to more risk seeking for relative gains than for relative losses. To test this rule, in two experiments, people repeatedly chose between fixed and risky options, where the risky option led equiprobably to more or less than did the fixed option. As was predicted, people were more risk seeking for relative gains than for relative losses. In subsequent memory tests, people tended to recall the extreme outcome first and also judged the extreme outcome as having occurred more frequently. Across individuals, risk preferences in the risky-choice task correlated with these memory biases. This extreme-outcome rule presents a novel mechanism through which memory influences decision making.
| Item Type: | Journal Article | ||||||
|---|---|---|---|---|---|---|---|
| Subjects: | B Philosophy. Psychology. Religion > BF Psychology H Social Sciences > HB Economic Theory |
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| Divisions: | Faculty of Science > Psychology | ||||||
| Library of Congress Subject Headings (LCSH): | Risk-taking (Psychology), Decision making, Economics -- Psychological aspects | ||||||
| Journal or Publication Title: | Psychonomic Bulletin & Review | ||||||
| Publisher: | Psychonomic Society | ||||||
| ISSN: | 1069-9384 | ||||||
| Official Date: | June 2014 | ||||||
| Dates: |
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| DOI: | 10.3758/s13423-013-0542-9 | ||||||
| Status: | Peer Reviewed | ||||||
| Publication Status: | Published | ||||||
| Access rights to Published version: | Restricted or Subscription Access | ||||||
| Funder: | Alberta Gaming Research Institute (AGRI), Natural Sciences and Engineering Research Council of Canada (NSERC), National Institutes of Health (U.S.) (NIH) | ||||||
| Grant number: | AG024361 (NIH) |
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