Lecture 4

Question 1

General concept behind Framing?

Answer 1

People choose differently depending on the way that outcomes are framed

Question 2

Propositions of Prospect Theory?

Answer 2

1) People evaluate the consequences of a decision by setting a
reference point
2) Diminishing marginal sensitivity - People are increasingly insensitive to larger gains and losses
3) When directly compared against each other, losses loom larger than gains

Question 3

When are people risk adverse? Risk-seeking?

Answer 3

prospects involving certain gain

Prospect involing certain loss

Question 4

Relationship between loss aversion and gain-seeking?

Answer 4

Loss aversion is twice as strong as gain-seeking – losing $100 causes
twice as much pain as corresponding pleasure from winning $100.

Question 5

Brain area associated with loss aversion?

Opposing area?

Answer 5

Amygdala (amygdala highjack)

Orbital-medial prefrontal cortex

Question 6

Loss framing is more effective than Gain framing when?

Gain framing better when?

But?

Answer 6

to motivate
people to step forward for risky-decisions

Gain framing better for riskless decision or preventive behavior

But effect is tiny

Question 7

Two main Framing types?

Answer 7

1) Risky choice (lives lost for sure = gamble v some lives saved for sure = do nothing)
2) Atrribute

Question 8

Attribute framing?

Answer 8

describing foods as “tasty” better than “healthy”

Question 9

“healthy” labing is advantageous to sell?

Answer 9

unheathy foods

1. If System 2 already knows that the product is unhealthy, it’s useful to engage System 1 by sticking a prominent health claim on the package (halo effect ).
2. If a food is actually healthy, then don’t try to sell it as “healthy”, because System 1 is already convinced that it must “taste bad”.