Framing effect

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Framing effect is a phenomenon observed when a decision maker, faced with a dilemma, becomes susceptible to the manipulation of context, where choices are controlled by how risky decision-frame options are presented. A decision-frame is a subjective conception of the actions, outcomes and contingencies associated with decision options. The (mis-)representation of options, due to the framing effect, often influences the choices of decision makers.

The context or framing of problems adopted by decision makers is controlled in part by extrinsic manipulation of the decision options offered, as well as by forces intrinsic to decision makers, e.g., their norms, habits, and unique temperament.

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[edit] Absolute and relative influences

Framing effects arise because it is frequently possible to frame a decision using multiple scenarios, wherein benefits may be expressed either as a relative risk reduction (RRR), or as absolute risk reduction (ARR). Extrinsic control over the cognitive distinctions, between risk tolerance and reward anticipation, adopted by decision makers can be facilitated by altering the presentation of relative risks and absolute benefits.

People generally prefer the absolute certainty inherent in a positive framing effect, where gains are assured. When decision options are framed as a likely gain, risk averse choices predominate.

A shift toward risk-seeking behavior occurs when decisions are framed in negative terms, or when a negative framing effect is adopted by a decision maker.

[edit] Frame manipulation research

Researchers have found that when decision problems framed in a positive light, less risky choices are generally the result; when problems are framed negatively, riskier choices tend to result. According to behavioral economists:

  • Positive framing effects (associated with risk aversion) result from presentation of options as sure (or absolute) gains.
  • Negative framing effects (associated with a preference shift toward choosing riskier options) result from options presented as the relative likelihood of losses.

Researchers have found that subjects were invariably affected, but to varying degrees, by framing manipulation. Individuals were risk averse when presented with value-increasing options, and when faced with value decreasing contingencies, tended towards increased risk-taking. Variations in decision framing, by manipulating the options to represent either a gain or as a loss, were found to alter the risk aversion preferences of decision makers.

In one study, 57% of the subjects chose a medication when benefits were presented in relative terms, whereas only 14.7% chose a medication whose benefit was presented in absolute terms. Further questioning of the patients suggested that, because the underlying risk of disease was ignored by the subjects, benefits were perceived as greater when expressed in relative terms.[1]

[edit] Theoretical models

Various models explaining the framing effect have been proposed:

  • Cognitive theories, such as the Fuzzy Trace theory, attempt to explain framing effects by determining the amount of cognitive processing effort devoted to determining the value of potential gains and losses.
  • Prospect Theory explains the framing effect in functional terms, determined by preferences for differing perceived values, based on the assumption that losses are weighed more heavily than equivalent gains.
  • Motivational theories explain framing effects in terms of hedonic forces affecting individuals, such as fears and wishes, based on the notion that negative emotions evoked by potential losses are usually greater than those evoked by hypothetical gains.
  • Cognitive cost-benefit tradeoff theory, which defines choice as a compromise between desires, either as a preference for a correct decision or a preference for minimized cognitive effort. This model, which dovetails elements of cognitive and motivational theories, postulates that the necessary cognitive effort for calculating the value of a sure gain is considerably lower than what is required to select a risky gain.

[edit] Neuroimaging

Cognitive neuroscientists have linked the framing effect to neural activity in the amygdala, and have identifed another brain region, the orbital and medial prefrontal cortex (OMPFC), that appears to moderate the role of emotion on decisions. Using functional magnetic resonance imaging (fMRI) to monitor brain activity during a financial decision-making task, greater activity was observed in the OMPFC of research subjects who were less susceptible to framing effects.

[edit] See also

[edit] External links

  • CMU.edu (pdf) - 'The Framing effect and risky decision: Examining cognitive functions with fMRI', C. Gonzalez, et al, Journal of Economic Psychology (2005)
  • FindArticles.com - 'Risky decision making across three arenas of choice: are younger and older adults differently susceptible to framing effects?', Michael Ronnlund, Erik Karlsson, Erica Laggnas, Lisa Larsson, Therese Lindstrom, Journal of General Psychology (January, 2005)
  • HBS.edu - 'Fixing Price Tag Confusion'(interview), Sean Silverthorne (December 11, 2006)
  • MSN.com - Framing effect' influences decisions

Emotions play a role in decision-making when information is too complex', Charles Q. Choi, MSNBC (August 3, 2006)

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