Imagine you are in the grocery store, about to buy some ice-cream. On one hand you are holding a package that reads “80% fat-free”. On the other hand, the package states “contains 20% of fat”. Which ice-cream would you pick?
What about this other, more serious situation: you are considering a surgical intervention to deal with a critical health problem. Your physician hands you an explanatory pamphlet that ends like this: “the survival rate for this intervention is 90%.”
Now, imagine the physician offers this other pamphlet, identical in every way except the last sentence is: “the mortality rate for this intervention is 10%.” Would you undergo the procedure?
Studies have shown that people prefer the ice-cream that is 80% fat-free and are more likely to accept medical procedures that present risks in terms of survival. People more often undertake an action when there are penalty fees for not doing so, than when getting a discount for accomplishing it. For instance, a study showed that almost 100% of students registered early when a penalty fee frame was presented, but only 65% when the same amount of money was framed as a discount.
But more importantly, what these examples try to showcase is that the way things are said has a huge impact on the decision making process.
Formally, this reliable and robust effect is known as the Framing effect, a wide concept that actually includes several types of framing.
The first one, described in the examples above, is referred to as ‘attribute framing’. It means that any specific feature of a product, service or fact can be described in positive or negative terms. Research in the area shows consistent preferences for positive descriptions when these criteria are met: the description focuses on only one feature, it doesn’t imply moral decisions or isn’t too extreme (no casino advertises: come gamble here, you have 0.0001% chances of winning!).
But the prototypical framing effect comes from the prospect theory by Kahneman and Tversky, and it involves framing risky choices. These famous scientists presented the participants with a problem where they had two choose between two possible options to solve a disease outbreak. The trick was that half the people were presented with a problem that emphasized saving lives, whereas the other half was presented with the same problem but emphasising losing lives.
The problem read like this: Imagine that the U.S. is preparing for the outbreak of an unusual Asian disease, which is expected to kill 600 people. Two alternative programs to combat the disease have been proposed. Assume the exact scientific estimate of the consequences of the programs are as follows. In a group of 600 people:
Program A: "200 people will be saved"
Program B: "there is a 1/3 probability that 600 people will be saved, and a 2/3 probability that no people will be saved"
Ok, write that down
Now, please choose one of these other 2 programs:
Program C: "400 people will die"
Program D: "there is a 1/3 probability that nobody will die, and a 2/3 probability that 600 people will die"
Again, please write down your answer.
What Kahneman and Tversky showed was that people tended to choose A over B and D over C. But take a closer look: A and C are different ways of saying the same thing, as B and D. So, if you chose A, you should also choose C, right? Yet, most people don’t behave like that. With these experiments, Kahneman and Tversky demonstrated systematic reversals of choices. When faced with risky options, people prefer a secure gain to a probable one, but a probable loss to a secure one. These findings have an enormous impact on how the financial industry presents information to their customers. And as a consumer, you should also be aware of the framing effect.
In any case, keep in mind: words matter!
Kahneman, D., & Tversky, A. (2013). Prospect theory: An analysis of decision under risk. In Handbook of the fundamentals of financial decision making: Part I (pp. 99-127).
Gächter, S., Orzen, H., Renner, E., & Starmer, C. (2009). Are experimental economists prone to framing effects? A natural field experiment. Journal of Economic Behavior & Organization, 70(3), 443-446.
Levin, I. P., Schneider, S. L., & Gaeth, G. J. (1998). All frames are not created equal: A typology and critical analysis of framing effects. Organizational behavior and human decision processes, 76(2), 149-188.