Encoding context determines risky choice

Madan, Christopher R.; Machado, F. S.; Mason, Alice; Ludvig, Elliot Andrew

doi:10.31234/osf.io/cujqf

Cited by 5 publications

(9 citation statements)

References 33 publications

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“…Their decision-making task had a limited set of decision outcomes and did not directly test memory accuracy, making it more di cult to determine the extent to which participants were relying on recall of speci c instances. Interestingly, the risk preferences (and memory recall patterns) in the current study are consistent with prior ndings that use a smaller set of outcomes (Konstantinidis, Taylor, & Newell, 2018;Madan et al, 2021).…”

Section: Discussionsupporting

confidence: 89%

“…This description-experience gap has been attributed to a process of drawing samples from memory (Hertwig & Erev, 2009), which might only feature a small subset of past experiences (Plonsky, Teodorescu, & Erev, 2015) or can be explicitly biased (Madan et al, 2017). In our previous work, using a risky-choice paradigm, we have consistently found that people overweight the extreme outcomes (highest and lowest in a context) in memory (Madan et al, 2014;Madan, Spetch, Machado, Mason, & Ludvig, 2021). This overweighting in memory leads to people being more risk-seeking for choices that involve the high extreme and less risk-seeking for choices that involve the low extreme.…”

Section: Introductionmentioning

confidence: 94%

“…The small outcome set typically used in decision-from-experience tasks has limited the data that can be collected after the decision-making task and therefore used to examine the relationship. These tasks typically include a limited set of outcomes (usually 3-6 di erent reward outcomes total), making the memory demands relatively low (Hertwig & Erev, 2009;Ludvig et al, 2018;Madan et al, 2014Madan et al, , 2021Wul , Mergenthaler-Canseco, & Hertwig, 2018). In previous experiments, we have used two key memory measures: frequency judgments and rst-outcome reported.…”

Section: Introductionmentioning

confidence: 99%

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Biased confabulation in risky choice

Mason¹,

Madan²,

Ludvig³

2020

Preprint

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When people make risky decisions based on past experience, they must rely on memory. The nature of the memory representations that support these decisions is not yet well understood. A key question concerns the extent to which people recall specific past episodes or whether they have learned a more abstract rule from their past experience. To address this question, we examine the precision of the memories used in risky decisions-from-experience. In two pre-registered experiments, we presented people with risky options, where the outcomes were drawn from continuous ranges (e.g., 100-190 or 500-590), and then assessed their memories for the outcomes experienced. In a preferential task, people were more risk seeking for high-value than low-value options, choosing as though they overweighted the outcomes from more extreme ranges. Moreover, people were very poor at recalling the exact outcomes encountered, but rather confabulated outcomes that were consistent with the outcomes they had seen and also biased towards the more extreme ranges encountered. This pattern emerged in both a preferential choice task and in a pure evaluation task, suggesting that the observed decision bias reflects a more basic cognitive process to overweight extreme outcomes in memory. These results highlight the importance of the edges of the distribution in providing the encoding context for memory recall. They also suggest that episodic memory influences decision-making through a rule-based abstraction and not through direct recall of specific instances.

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Section: Discussionsupporting

confidence: 89%

Section: Introductionmentioning

confidence: 94%

Section: Introductionmentioning

confidence: 99%

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Biased confabulation in risky choice

Mason¹,

Madan²,

Ludvig³

2020

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“…Thirdly, the relative payout effect suggests that the best and worst payouts of a gambling experience may disproportionately affect behavior. In studies using doors as choice stimuli, we found that relative payout effects were specific to a particular episode and set of cues . Therefore, in a casino, overweighting of the best and worst payout is probably based on a specific gambling episode rather than the entire set of gambling experiences.…”

Section: Discussionmentioning

confidence: 85%

Effects of winning cues and relative payout on choice between simulated slot machines

2020

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Background and aims Cues associated with winning may encourage gambling. We assessed the effects on risky choice of slot machine of: (1) neutral sounds paired with winning, (2) casino‐related cues (such as the sound of coins dropping and pictures of dollar signs) and (3) relative payouts. Design Experimental studies in which participants repeatedly chose between safer and riskier simulated slot machines. Safer slot machines paid the same amount regardless of which symbols lined up. Risky machines paid different amounts depending on which symbols lined up. Effects of initially neutral sounds paired with the best payout were assessed between‐groups (experiment 1a) and within‐participants (experiment 1b). In experiment 2, pairing of casino‐related audiovisual cues with payout was assessed within participants, and cue timing was assessed between groups. Setting A university research laboratory in Edmonton, Canada. Participants Undergraduate students (n = 630 across three experiments). Measurements Preference for riskier over safer machines, preference between machines that differed in cues, payout recall and frequency estimates for payouts. Risky choice was calculated as the proportion of choices of the risky machine when presented with a fixed machine of the same expected value. Findings In experiment 1a, risky choice was slightly increased by pairing a sound with the best payout compared with pairing the sound with a lower payout (P = 0.04, d = 0.28) but not compared with no sound [P = 0.36, d = 0.13, Bayes factors (BF)10 = 0.22]. In experiment 1b, people did not prefer a machine with a best‐payout sound over one with a lower‐payout sound (P = 0.67, d = 0.03, BF10 = 0.11). Relative payout affected choice: risky choices were higher for high‐ than low‐payout decisions (P < 0.001, d = 0.53). In experiment 2, people preferred machines with casino‐related cues paired with winning (P < 0.001, r2 = 0.11) and cue timing (at choice or concurrently with the win) had no effect (P = 0.95, r2 = 0.0, BF10 = 0.05). Casino‐related cues also enhanced payout memory (P = 0.013 and 0.006). Cue effects were not specific to risk: people also preferred fixed‐payout machines with casino‐related cues (P < 0.001, r2 = 0.16). Conclusions In a gambling simulation, student participants chose more risky slot machines when payouts were relatively higher and when casino‐related cues were associated with payouts. Pairing a neutral sound with the best payout did not consistently affect slot machine choice, and the effect of casino cues did not depend on their timing. Casino‐related cues enhanced payout memory.

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“…The extreme-outcome rule only manifests when outcomes are learned through experience rather than being described, and it requires the intermixing of choices involving relative gains and losses within the same context. For example, the absolute level of risk preference for a choice between a fixed option leading to +20 points and a risky option leading to either +10 or +30 points, depends on whether the choice occurs in the context of other choices that involve losses or other choices that involve higher valued gains (see Madan et al, 2018).…”

Section: Resultsmentioning

confidence: 99%

Comparative inspiration: From puzzles with pigeons to novel discoveries with humans in risky choice

Madan¹,

Ludvig²

2018

Preprint

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Both humans and non-human animals regularly encounter decisions involving risk and uncertainty. This paper provides an overview of our research program examining risky decisions in which the odds and outcomes are learned through experience in people and pigeons. We summarize the results of 15 experiments across 8 publications, with a total of over 1300 participants. We highlight 4 key findings from this research: (1) people choose differently when the odds and outcomes are learned through experience compared to when they are described; (2) when making decisions from experience, people overweight values at or near the ends of the distribution of experienced values (i.e., the best and the worst, termed the “extreme-outcome rule”), which leads to more risk seeking for relative gains than for relative losses; (3) people show biases in self-reported memory whereby they are more likely to report an extreme outcome than an equally-often experienced non-extreme outcome, and they judge these extreme outcomes as having occurred more often; and (4) under certain circumstances pigeons show similar patterns of risky choice as humans, but the underlying processes may not be identical. This line of research has stimulated other research in the field of judgement and decision making, illustrating how investigations from a comparative perspective can lead in surprising directions.

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Encoding context determines risky choice

Cited by 5 publications

References 33 publications

Biased confabulation in risky choice

Biased confabulation in risky choice

Effects of winning cues and relative payout on choice between simulated slot machines

Comparative inspiration: From puzzles with pigeons to novel discoveries with humans in risky choice

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