Journal
PSYCHONOMIC BULLETIN & REVIEW
Volume 21, Issue 3, Pages 629-636Publisher
SPRINGER
DOI: 10.3758/s13423-013-0542-9
Keywords
Risky choice; Memory biases; Decisions from experience; Decision making; Behavioral economics
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Funding
- NIA NIH HHS [P30 AG024361] Funding Source: Medline
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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.
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