The effect of imperfect memory recall on risk preferences

Abstract

AbstractPeople often take on different levels of risk when deciding on future actions compared with when they take actions with immediate consequences. The presently reported research investigated how imperfect recall of previously chosen options influences temporal fluctuations in risk preferences. In two incentivized studies with a waiting time before decision resolution (a 4‐week waiting period from an initial decision), we observed that errors in the recall of previous choices played a substantial role in constructing risk preferences for choices that are usually resolved after a delay. More specifically, in a first study, we found that after a waiting period (i.e., after participants waited for their risky choices to be resolved), participants perceived that they took less risk during their initial choices than they actually did. Importantly, when asked about whether they would change their initial choices, participants declared that they would take riskier choices. In a second study, we tested directly whether such a shift in initial choices could also be demonstrated behaviorally. Results revealed that after beliefs about past choices were induced, participants changed their risk preferences in line with the information presented during belief induction.