L10: Framing effects: Tversky and Kahneman (1981)

Question 1

What are framing effects?

Answer 1

an agent’s choice from a feasible set of alternatives should be unaffected by any re-description of it that leaves all objective characteristics unchanged

Question 2

Descriptively, does the framing effects principle hold?

Answer 2

NO: Descriptively the principle often fails – choices do depend on how a task is framed

Question 3

What did the asian disease problem show? (T&K 1981)

Answer 3

Describing a choice between medical programmes ITO lives lost vs. lives saved led to dramatically different answers even though problem is the same

Question 4

Explain the Asian disease problem? (T&K, 1981)

Answer 4

US preparing for outbreak of unusual disease. 2 programmes are possible:

A) if A is adopted 200 people will be saved (72%)
B) if B is adopted, there’s a 1/3 prob. that 600 people will be saved a 2/3s prob. no one will be saved (28%)

another 2 programmes are proposed:

C) If program C is adopted 400 people will die (22%)
D) If program D is adopted there’s a 1/3 prob. that nobody will die and a 2/3s prob. that 600 people will die. (78%)

Question 5

See

Answer 5

• Easy to see A is same as C, and B is same as D in real terms, however C&D stated ITO losses and A&B ITO gains
  This demonstrates failure of the ‘invariance’ assumption; decisions should be based on real value of outcomes, not the way the options are framed

Question 6

How do K&T explain the ADP?

Answer 6

respondents are naturally risk averse in ‘lives saved’, & risk seeking in ‘lives lost’