Which One Do You Prefer? (Impacts of framing on decision and choice)

By Bahram Mirfakhraei

(http://imlisteningnow.com)

Which one do you prefer?

1)      A sure win of 30$

2)      80% chance to win 45$ 

What do you think about when you want to answer such questions? What comes to your mind?

According to Tversky and Kahneman, a choice process includes two steps. In first step the outcomes are framed and in second step they are evaluated. In other words, first we think about outcomes of each option and then we compare them. Most of the times, people do not notice this process while they are answering such questions. But it is what happens automatically. During a trade-off between the options, usually low probabilities are overestimated, high probabilities are underestimated and the option with highest utility will be selected.

Tversky and Kahneman describe “desicion frame” as:

Decision-maker’s conception of the acts, outcomes, and contingencies associated with a particular choice”.

They also mention that formulation of the problem in addition to personality and habits of the decision maker affect the framing. Formulating a single question in different ways can result in different responses. For instance, imagine there has been an outbreak of a disease and it is expected that 600 people will die. Which of the following options will you choose?

If program A is adopted, 200 people will be saved

If program B is adopted, there is 1/3 probability that 600 people will be saved and 2/3 probability that no people will be saved

In Tversky and Kahneman’s study, 72% of the respondents chose program A.

Same question can be formulated in a different way. Imagine conditions are the same but this time:

If program C is adopted, 400 people will die

If program D is adopted, there is 1/3 probability that nobody will die, and 2/3 probability that 600 people will die

This time 78% of respondents chose program D.

These options are the same and their only difference is in the way that they are formulated. The options in first question are based on the lives that can be saved, while in second question the options are based on the lives that will be lost. Even though the questions are the same, the option that majority of respondents chose was different.

Therefore, if a question is formulated differently, it will be framed differently. Consequently, respondent’s choice and decision will be different. So, framing plays a key role in decision-making and change in framing can result in change of decision.

References

TVERSKY, A. & KAHNEMAN, D. 1981. The framing of decisions and the psychology of choice. Science, 211, 453-458.

http://imlisteningnow.com/listeningskills/listening-currency-new-year-new-habits/attachment/choice-sign [Accessed 16/4/2011].

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3 comments so far

  1. cherylday21 on

    Thank you for your blog Bahram. I must admit I find this article a little obvious. Of course our decision choice is relevant to the options, and our decision will change as the options change, as will our decision depending on how the options are framed or labelled.

    However, I would like to raise Tversky and Kahneman’s comments on the reference point from which people make their decision. The article discusses the value of the reference point with regards to evaluating the outcome as a gain or as a loss. As mentioned, this is especially significant for those who gamble. Unfortunately, those addicted to gambling and already on a losing streak consider their next opportunity as a chance to win rather than another chance to lose. This is due to their reference point being from $0 rather than adding to their amount they have already lost. Essentially their reference point is somewhat skewed.

    The paper also raises the observation that bets on long shots is most popular on the last race of the day. This is understandable since the expected utility is considered a major theory of decision making under risk. I think the level of utility gained from a lucky long shot win after a day at the races would be far greater than any other win of the day, regardless of how many champers you’ve had or how sore your feet are. The chance to pull a win on a long shot and on the last race of the day would provide a higher level of utility for a longer period of time. It has a wow factor attached to it and remains as a topic for conversation for some time to come. For this reason a last chance whim is worth the risk (for some).

    Moving away from the races now and onto a more serious topic, such as the debate over labelling and how choices are framed, for example cash discount vs credit-card surcharge. Labelling and how choices are framed plays a fundamental role in decision making, which further supports Carmen Lawrence’s suggestion that a Carbon Offset (or something to the like) is more likely to be accepted than a Carbon Tax. The word tax typically generates negative connotations where as offset tends to initiate at least a neutral and at most a positive reaction. Among other things, maybe the Prime Minister needs to reconsider the labelling of the Carbon ‘thingamajig’.

    In conclusion, I guess only when every choice comes with a list of options and consequences and that choice is only asked once will we be considered rational.

  2. caitlinmurray9 on

    This paper also correlates with our last lecture/tutorial as well, coming up with questions for polls. It is really interesting how they found the difference in response to the same question reworded. This could definitely come in play in opinion polls, and really emphasises the need to really contemplate the wording and choices within a question.

  3. Ayshe Kerimofski on

    I do agree with what the paper says, one night I was unable to sleep so I decided to watch abc4, the constant news channel, and some guy was talking about how and why people make decisions. The one scenario that fits with what you said was abou the lives lost/gained situation.

    So you see a man on a runaway golf cart which is speeding towards a group of 5 people, and you have two options;
    to do nothing, which would kill all the 5 unaware people,
    or stop the golf cart, killing only the driver.
    In this scenario most people will choose the latter, killing only the driver. This time the situation is changed slightly.
    So the golfcart is going skitz and its going to kill the 5 people, however you are watching from a bridge above and are again given two options;
    to do nothing, killing all the 5 people
    or pushing a fat man off the bridge so he will land in front of the cart, killing the man, but saving the bystanders.
    When put like this most people would choose to do nothing, even though it was the same number of deaths ( 1 v 5 ).

    So it does fit with the research of the paper


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