1. Running head: FRAMING AND DECISION-MAKING 1
Effects of Framing and Social Stress on Financial Decision-Making
Brianna D. Burgess
University of Montana

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Abstract
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Keywords: framing, prospect theory, risk-seeking, risk-aversion, stress

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Effects of Framing and Social Stress on Financial Decision-Making
For decades experts in psychology, economics, and political science (among others) have
been interested in human decision-making and the influence of framing. For example, imagine
that you are driving down the road and your fuel light comes on. There is one gas station on the
left side of the road and one on the right. The station on the right advertises gas for $2.00 per
gallon with a 5 cent discount for cash. The station on the left advertises gas for $1.95 per gallon
with a 5 cent surcharge for using a credit card. Holding all other factors about the stations the
same, which would you choose? It is likely that most people will choose the station that offers a
discount, assuming they are using cash.
This particular example illustrates the framing effect in a very simple, yet practical way.
People evaluate outcomes based on a change from their reference point which is usually their
current state. Outcomes are perceived as losses or gains and then decisions are made accordingly.
Because humans tend to treat losses more seriously than gains of an equivalent amount ($1.95
for cash at both stations or $2.00 for credit card), risk-averse decisions are made when the
possibility of a sure gain is included. Put more simply, people tend to be conservative when faced
with a sure gain versus a probabilistic gain, but the opposite is true when faced with a sure loss
versus a probabilistic loss.
This phenomenon by which an individual’s opinion or perception of an issue can be
altered by a simple change of words has been studied extensively, but most recently in the last
decade. Time and time again it has been shown that decision-making is influenced by an
individual’s current reference point and the way in which an issue is framed (Tversky &
Kahneman, 1981). Furthermore, decision-making is especially susceptible to various demands
exerted by the environment, otherwise known as stressors (Porcelli, 2009)

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The proposed study seeks to investigate the effect of framing and stress and risky
decision-making. Risky decision-making is defined as a tendency to make decisions that are risk-
seeking rather than risk-averse. Due to the large body of research already dedicated to the
framing effect, I intend to take the previous framing experiments a step further and add a
dimension of social stress. The logic behind this is that stress can significantly impair our
decision-making. I would like to know if stress makes individuals even more risk-seeking when
presented with a situation that is framed in terms of loss and if the same is true for a situation that
is framed in terms of a gain.
Before explaining the current proposal, it is necessary to briefly examine some popular
decision-making models in psychological and economic literature. First, rational choice models
of decision-making assert that an individual rationally considers all possible outcomes of a
situation and conducts a cost-benefit analysis internally before proceeding with a decision
(Porcelli, 2009). This theory assumes that people rationally navigate through the world making
decisions that will increase pleasure and decrease pain. According to Porcelli (2009), an
economic model of decision-making known as Expected Utility (EU) theory, predicts that
decision-makers always choose from alternatives by maximizing utility (reward value of a
decision’s outcome combined with the probability of that particular outcome coming to pass).
Essentially, it becomes necessary for an individual to have the capacity to perform a mental
computation that would provide the above-mentioned predicted value.
We now know through extensive research on human decision-making that we do not use
such rational choice models, but instead rely on irrational biases and automatic processing of
information. When faced with a decision-making task, humans often rely on their current
reference point or past experience to inform their choice. A hallmark study by Tversky and

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Kahneman (1981) demonstrated that the phrasing of a question (frame) can have a powerful
impact on subsequent decisions. Porcelli (2009) points out that in Tversky and Kahneman’s
experiment, participants were presented with two mathematically equivalent decisions about
treatment for a hypothetical disease outbreak. One treatment was framed as a possible gain and
another was framed as a possible loss which led to a clear decision-making bias.
It is my assumption that risk-seeking behavior will be statistically significantly greater
when stress is included with a negatively framed scenario. However, I hypothesize that when
faced with a scenario in terms of gains, individuals’ decision-making tendencies will not be
affected with the addition of stress.
Methods
Participants
One-hundred and twenty undergraduate students from the University of Montana will be
recruited to participate in the proposed experiment and will be granted course credit for their
participation. This sample size is consistent with most previous framing experiments and is large
enough to detect significant findings. Introduction to Psychology students will be used because
most are college freshman in the 18-21 year old age range. This sample is not only convenient
and cost effective, but I believe this sample will also help control for differences in cognitive
ability and life experience. I assume that students who are older will not only have more
knowledge but will also have more life experiences to influence the way they make decisions
and possibly bias the results I seek.
Materials/Design
The proposed study will utilize the standard protocol for the Tiered Social Stress Test to
induce stress onto subjects who are randomly assigned into the stress condition. A paper and

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pencil story about a disease outbreak (slightly modified from Tversky & Kahneman, 1981) will
also be used. The design of the proposed study is a 2 x 2 x 2 between-subjects factorial design (8
conditions). The first factor corresponds to the type of frame used (positive or negative), the
second factor is whether the TSST was given or not (stress or no stress), and the third factor is
whether the treatment was a sure or probabilistic option.
Procedure
In order to examine the effects of framing and stress on risky decision-making,
participants will first be randomly assigned to the stress condition or the control condition (n=60
in both levels) before the experiment takes place. Subjects in the control (no stress) condition
will be asked to wait in a closed-door cubicle until further notice while the subjects in the stress
condition are instructed to Although the TSST has been modified to meet the needs of various
research groups, it generally consists of a waiting period upon arrival, anticipatory speech
preparation, speech performance, and verbal arithmetic performance periods, followed by one or
more recovery periods.
Results
I believe that this study’s data will be consistent with previous research on the framing
effect and will logically follow the rationale behind the effects of acute stress on decision-
making.
Discussion
If my data collection goes according to plan, than I expect to reject my null hypothesis
and have evidence to support the alternative hypothesis that stress increases risky-decision
making. I believe that participants who are faced with an acute stressor will revert to automatic
processes that will lead to rasher and therefore riskier decisions. It is my assumption that the

7. FRAMING AND DECISION-MAKING 7
influence of stress (release of cortisol in HPA axis) will have a direct effect on an individual’s
ability to rationalize important financial decisions regardless of how it is framed. More
specifically, I propose that stress leads to risk-seeking behavior when a scenario is framed as a
possible gain and when the same scenario is framed as a possible loss. This assumption
contradicts current research on the influence of stress on decision-making.
This proposed study would therefore suggest that not only are human decisions often
grounded in irrational biases, but they are also influenced greatly by the presence of stress. On
one hand it seems that being stressed and being faced with an important decision would cause an
individual to slow down and truly weigh the costs and benefits of an outcome, but research
suggests that stress impairs our decision-making capacity regardless of the type of decision.
The proposed experiment clearly has numerous limitations as it is addressing multiple
complex issues. Stress and the stress response are still relatively understudied and are just
recently catching the attention of researchers around the world. Only in recent decades have
professionals realized the impact of stress and influence it exerts on our everyday life. As a result,
we are still learning about what is actually going on in the body when faced with an acute
stressor.
In addition, decision-making is a higher order cognitive process and is difficult to study
with naïve techniques. It appears that current research is taking a neuropsychological approach as
to determine the underpinnings of choice with brain imaging techniques.
The large body of research dedicated to framing and its effect on decision-making has come to
the same conclusion: The way that an issue is framed can determine a person’s response to that
issue.

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References
Tversky, A., & Kahneman, D. (1981). The framing of decisions and the psychology of choice.
Science, 211(4481), 453-458. Retrieved from http://www.jstor.org/stable/1685855
Druckman, J. (2001). Using credible advice to overcome framing effects. Journal of Law,
Economics, and Organization, 17, 62-82, doi:10.1093/jleo/17.1.62.
Gächter, S., Orzen, H., Renner, E., & Stamer, C. (2009). Are experimental economists prone to
framing effects? A natural field experiment. Journal of Economic Behavior &
Organization, doi:10.1016/j.jebo.2007.11.003.
Association for Psychological Science. (2009). Under pressure: The impact of stress on decision
making. Science Daily. Retrieved from
www.sciencedaily.com/releases/2009/09/090915174459.htm
Jacoby, W. G. (2000). Issue framing and public opinion on government spending. American
Journal of Political Science, 44(4), 750-767. Retreived from
http://doi.org/10.2307/2669279.
Joslyn, M. R., & Haider-Markel, D. (2002). Framing effects on personal opinion and perception
of public opinion: The cases of physician-assisted suicide and social security. Social
Science Quarterly, 83(3), 690-70, doi:http://dx.doi.org/10.1111/1540-6237.00109
Birkett, M. A. (2011). The trier social stress test protocol for inducing psychological stress.
Journal of Visualized Experiments, 56(3238). http://doi.org/10.3791/3238
Last Name, F. M. (Year). Article Title. Journal Title, Pages From - To.
Last Name, F. M. (Year). Book Title. City Name: Publisher Name.

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Tables
Table 1
Positive Frame
TSST Treatment A Treatment B
Stress .73 .27
No Stress .72 .28
Note: Column means: .725 > .275; main effect of type of gain (sure vs. probabilistic), Row
means: .5 = .5; no main effect of stress
Table 2
Negative Frame
TSST Treatment A Treatment B
Stress .15 .85
No Stress .25 .75
Note: Column means: .8 > .2; main effect of type of loss (sure vs. probabilistic), row means: .5
= .5; no main effect of stress

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Figures
Figure 1 & 2
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Treatment A (risk-aversive) Treatment B (risk-seeking)
Negative Frame
Stress No Stress
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Treatment A (risk-aversive) Treatment B (risk-seeking)
Positive Frame
Stress No Stress