The framing effect is a cognitive bias where people decide between options based on whether the options are presented with positive or negative connotations. Individuals have a tendency to make risk-avoidant choices when options are positively framed, while selecting more loss-avoidant options when presented with a negative frame. In studies of the bias, options are presented in terms of the probability of either losses or gains. While differently expressed, the options described are in effect identical. Gain and loss are defined in the scenario as descriptions of outcomes, for example, lives lost or saved, patients treated or not treated, monetary gains or losses.
Prospect theory posits that a loss is more significant than the equivalent gain, that a sure gain (certainty effect and pseudocertainty effect) is favored over a probabilistic gain, and that a probabilistic loss is preferred to a definite loss. One of the dangers of framing effects is that people are often provided with options within the context of only one of the two frames.
The concept helps to develop an understanding of frame analysis within social movements, and also in the formation of political opinion where spin plays a large role in political opinion polls that are framed to encourage a response beneficial to the organization that has commissioned the poll. It has been suggested that the use of the technique is discrediting political polls themselves. The effect is reduced, or even eliminated, if ample credible information is provided to people.
Amos Tversky and Daniel Kahneman explored how different phrasing affected participants' responses to a choice in a hypothetical life and death situation in 1981.
Participants were asked to choose between two treatments for 600 people affected by a deadly disease. Treatment A was predicted to result in 400 deaths, whereas treatment B had a 33% chance that no one would die but a 66% chance that everyone would die. This choice was then presented to participants either with positive framing, i.e.
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In the social sciences, framing comprises a set of concepts and theoretical perspectives on how individuals, groups, and societies organize, perceive, and communicate about reality. Framing can manifest in thought or interpersonal communication. Frames in thought consist of the mental representations, interpretations, and simplifications of reality. Frames in communication consist of the communication of frames between different actors. Framing is a key component of sociology, the study of social interaction among humans.
Loss aversion is a psychological and economic concept which refers to how outcomes are interpreted as gains and losses where losses are subject to more sensitivity in people's responses compared to equivalent gains acquired. Kahneman and Tversky (1992) have suggested that losses can be twice as powerful, psychologically, as gains. When defined in terms of the utility function shape as in the Cumulative Prospect Theory (CPT), losses have a steeper utility than gains, thus being more "painful" than the satisfaction from a comparable gain as shown in Figure 1.
Mental accounting (or psychological accounting) is a model of consumer behaviour developed by Richard Thaler that attempts to describe the process whereby people code, categorize and evaluate economic outcomes. Mental accounting incorporates the economic concepts of prospect theory and transactional utility theory to evaluate how people create distinctions between their financial resources in the form of mental accounts, which in turn impacts the buyer decision process and reaction to economic outcomes.
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