Memory reflected in our decisions: Higher working memory capacity predicts greater bias in risky choice
Jonathan Corbin,* Todd McElroy and Cassie Black
Appalachian State University

The current study looks at the role working memory plays in risky-choice framing. Eighty-six participants took the Automatic OSPAN, a measurement of working memory; this was followed by a risky-choice framing task. Participants with high working memory capacities demonstrated well pronounced framing effects, while those with low working memory capacities did not. This pattern suggests that, in a typical risky-choice decision task, elaborative encoding of task information by those with high working memory capacity may lead them to a more biased decision compared to those with low working memory.

Keywords: Asian disease problem, framing, risky choice, working memory capacity, context, fuzzy-trace theory.
1 Introduction

Throughout our lives, we are faced with many small and large decisions that exist within a variety of contexts. Many of these choices involve some aspect of risk, like choosing whether to invest in certain stocks, deciding on medical treatment options, or even deciding whether to risk human lives. The most studied examples of risk and decision making involve risky choices presented within a positive or negative framework, or risky-choice framing effects.

Risky-choice framing effects are derived from Prospect Theory predictions (Kahneman & Tversky, 1979) and have become one of the most studied examples of rational decision making. According to Prospect Theory the presentation of an outcome as either a loss or gain affects the amount of risk a person is willing to accept. This effect is attributed to differences in perceived subjective value and is captured by the value function, which is concave for gains, yielding risk-aversive preferences, and convex for losses, yielding risk-seeking preferences.

In the most widely tested example, Tversky and Kahneman (1981) presented participants with an Asian disease problem wherein 600 lives were at stake. Participants were then presented with a set of alternatives, one risk-free and the other risky. The alternatives were framed either positively or negatively, in terms of people that would be “saved” or “die”. Their findings revealed that, despite identical expected values, most participants preferred the risk-free alternative when the problem was framed positively and the risky alternative when framed negatively. This type of task design is commonly referred to as “risky-choice” (Levin, Schneider, & Gaeth, 1998).

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