1. Fact & fiction are agreements. A story both teller and listener believe to be true could be labelled "fact" and one both agree is untrue could be "fiction". However those are not the only possibilities. A story the listener believes to be true but not believed to be so by the teller would probably be labelled a "lie" by a 3rd party. And the reverse might be labelled a "error" (or a delusion at worst).
2. In most social situations there is no 3rd party umpire of truth & falsity. And agreement on "fact" and "fiction" can be murky esp. when talking about interpretations and motivations. We end up negotiating a lot of this stuff.3. The belief of a listener or teller in the story is not always constant. As a teller I might distort events for any number of reasons both innocuous (e.g. compressing events to make the story easier to follow) or self-serving (to influence the listener). As listener I constantly revise my belief of the story - esp. if I don't know the teller well or doubt their reliability.
I'd like to do an experiment where a story is told over the phone with teller and listener being able to control a slider with "totally true" at one end and "totally false" at the other. The result would be a pattern drawn on the above matrix (with a time component - you might show that with a gradual change in colour from start to end).
I wonder what the patterns would look like?