Biased confabulation in risky choice

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 examined the precision of the memories used in risky decisions-from-experience. In three 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 two preferential tasks, people were more risk seeking for high-value than low-value options, choosing as though they overweighted the outcomes from more extreme ranges. Moreover, in two preferential tasks and a parallel evaluation task, people were very poor at recalling the exact outcomes encountered, but rather confabulated outcomes that were consistent with the outcomes they had seen and were biased towards the more extreme ranges encountered. This common pattern suggests that the observed decision bias in the preferential task reflects a 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 gist memory and not through direct recall of specific instances.