Beyond Math: Stories as a Testbed for Memorization-Constrained Reasoning in LLMs

Memorization has been shown to greatly inflate Large Language Models' (LLMs) performance on domains such as math and logic, where success should primarily rely on applying generalizable reasoning rules. In many real-world applications, however, memorization is not meant to be eliminated but selectively constrained—for example, in story understanding, where background knowledge must be integrated with narrative context. Drawing on the cognitive science distinction between “verbatim” (exact recall) and “gist” (semantic abstraction) memorization, we propose a two-tier framework for analyzing how LLMs reason under different degrees of memory access. The Inductive (prompt-guided) Setting softly steers models to reason through selective, context-relevant recall, while the Restrictive Setting imposes stronger constraints by limiting verbatim memory access. Evaluating GPT-4o, LLaMA3.3-70B, and DeepSeek V3 on six character-centric story understanding benchmarks, we find up to a 45.2% accuracy drop under the Restrictive Setting, revealing strong dependence on surface recall. By contrast, the Inductive Setting maintains performance, indicating that prompting can align LLMs toward memorization-constrained reasoning.