Framing Flashcards
what is the second example from the paper with the disease killing 600 people about framing
Tversky and Kahneman 1981, Steve randomly selected from representative sample, description by neighbour as shy and withdrawn, passion for detail, is Steve more likely a librarian or farmer, ratio of employment in agriculture vs libraries in UK -> 20 to 1
what are framing effects
different presentations of X yields different choices X*1 and X*2, wording, partition, aggregation etc, also emotional state
what is heuristics
decision via heuristic (->Xtilda) rather than optimisation (->X*), rules of thumb, over/underweight parts of information, etc
what is a decision problem defined by
acts: options between which you must choose outcomes: consequences of any option contingencies: the conditional probabilities relating options and outcomes
what is the decision frame
agent’s conceptualisation of decision problem
what does the situation in which ‘decision frame ≠ decision problem’ depend on
formulation of problem, agent (norms, habits, character, etc)
what are the different framing presentation options
separated aggregated, nudges, default options
what is narrow bracketing/framing
facing a series of decisions, people evaluate choices within ‘brackets’, brackets can be broad (integrated) or narrow (viewed in isolation), people tend to frame/bracket narrowly –> sub-optimal (mostly)
what is myopic loss aversion (MLA)
narrow framing (=myopic) + prospect theory (=loss aversion), constant avoidance of losses in series of tiny decisions, problem: not seeing the big picture, ie potentially series of sub-optimal decisions
who introduced mental accounts
Tversky and Kahneman (1981)
what are the three types of accounts for mental accounting
Minimal: only compare differences in options, regardless of common features (pay £10 or don’t see play) Topical: relate outcomes to reference level determined by context (pay additional £10 or don’t see play) Comprehensive: take all other factors into consideration (do maths and see: ticket lost=money lost)
what does traditional economic theory say about mental accounting
economic theory assumes we always bracket broadly and use a comprehensive account
what is the idea behind Prelec and Loewenstein (1998)
standard theory says minimise the present value of payments by financing, BUT: thinking of ongoing payments for product while using it diminishes perceived benefits, even stronger for consumption or low-utility goods
what are the applications of purchasing decision model from Prelec and Loewenstein 1998
Token payment -> more spending (casino chips, currency abroad), Mental prepayment -> facilitate 1-time activities (taxi ride, family time), Fixed-fee pricing -> more consumption (transport, telecommunications)
