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Framing

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Framing

  1. 1. FRAMING Farhad Heydarian Pooria Miladi Hafez Ejlali
  2. 2. What is Framing?
  3. 3. What is Framing? • Which one to choose? a) receive 100$ for sure b) 50% chance for 200$ and 50% chance for nothing • What is the rational choice??
  4. 4. Different frames are different ways of looking So It means Solving Different mental models
  5. 5. Size and shape of a window frame, make the view Defining and structuring The problem, makes the Decision maker’s view
  6. 6. • We make frames for our problems • Also we can be framed by experts • Cost accounting frame: Mental accounts Particular frame experience norms expectations Desire for simplicity habit
  7. 7. Types of Framing • Outcome framing: Different representations • Structure framing: Size of view • Task framing: interpretation
  8. 8. Outcome Framing • We usually use numbers to describe the outcoems • Numerical quantites can be defined in number of ways What we will discuss 1- Gain or losses 2- Aggregate or disaggregate quantities 3- Scaling the outcome in a different currency * Loss aversion
  9. 9. 1- Gains or Losses • 600 people expected to be killed by the disease... Case A: a) 400 people will die b) 1/3 probability that no one will die 2/3 probability that 600 people die Case B: a) 200 people will be saved b) 1/3 probability that 600 people will be saved 2/3 probability that no one will be saved
  10. 10. Prospect Theory Actual loss Actual gain Neutral reference point Psychologi cal value
  11. 11. • 100 shares for 20$ per share two years ago • Stock drops to 10$ per share during two years • A possible great “hit” :drilling for oil or “nothing” • Sell the stock for 10$ or not?
  12. 12. 2- aggregate or disaggregate quantitites • Hedonic editing: V(x&y)=Max[v(x+y),v(x)+v(y)] • Multiple gains • Multiple losses • Large gain, small loss • PAD Framing
  13. 13. 3- Scaling in a different currency • Gamble in fiction currency • 20$ to each participant. • 2PI$ or 200 PI& in fiction currency. • Half amount of risk for lower amount of fiction money! - Anchoring on the nominal value - Using numerosity to make judgment of quantity
  14. 14. Loss Aversion
  15. 15. Endowment effect WTA~WTP
  16. 16. Sunk cost effect Past investment => continue an endeavor Not letting the product to go to waste 50$ and 100$ ski trip A businessman when the price of his goods decreased
  17. 17. Advantage and disadvantage in choice Difference between two disadvantages Is more than Difference between two advantages
  18. 18. Status quo bias Loosing status quo > gaining other conditions New medical plan wih new employees Mug and chocolate bar Reluctance to choose After choosing Loss of other choices > Gain of present choice Worse feeling after decision Loss aversion
  19. 19. Structure Framing • Size & Arrangement of decision maker’s view of problem • Can be done in three different ways: 1- Integration or segregation of information 2- Sequential framing of contingent events 3- Scope of the frame
  20. 20. 1- Integration & Segregation • Two Cases : Case 1 : E) 25% chance to win 240$ & 75% to lose 760$ F) 25% chance to win 250$ & 75% to lose 750$ F dominates E : E) [ 0 percent ] & F) [100 percent ] Case 2 : Two Concurrent Decisions
  21. 21. Decision 1 : A) A sure gain of 240$ [ 84% ] B) 25% chance to gain 1000$ & 75% to gain nothing [ 16% ] Decision 2 : C) A sure loss of 750$ [ 13% ] D) 75% chance to lose 1000$ & 25% to lose nothing [ 87% ] • Conjunctive preference for A&D [73%] over
  22. 22. • Bracketing Effect - Discrepancy Between Case 1 & Case 2 - When facing a group of choices, decision maker may use: 1- Broad Bracketing : - Bracketing choices together into one compound choice 2- Narrow Bracketing : - Considering choices one by one
  23. 23. 2- Sequential Framing • Two Cases: Case 1) A two-stage game : 75% chance to get nothing, 25% to reach 2nd stage A) A sure win of 30$ [ 74 percent ] B) 80% chance to win 45$ [ 26 percent ] Case 2) C) 25% chance to win 30$ [ 42 percent ]
  24. 24. • Pseudocertainty Effect : -Two case are identical , but not the choice patterns! -Contrast between patterns is due to “pseudocertainty” -Option A seems more attractive, because: Respondents WRONGLY take reaching 2nd stage as “GRANTED” - This certainty is just an “illusion”! - Best way to advertise an insurance policy:
  25. 25. The Scope of the Frame • “Narrowly “ framed mental accounts - Cost & benefits are “Coupled” • “Broadly” framed mental accounts - Facilitates “Decoupling” • Price Bundling - Ernie buys four 40$ of worth, 1-day tickets - Bert buys a single 160$ of worth, 4-day ticket - Poor skiing conditions of 4th day, who is more likely to ski
  26. 26. - Economic perspective - Ambiguity inherent a bundled transaction - Which one will use narrow framing, Ernie or Bert? • Reducing loss aversion through “Broad” framing 1-Case of vacation package : airfare, hotel, sightseeing - sightseeing option is deleted A) Bundled price with decomposed prices
  27. 27. 2-Equity Premium Puzzle - Loss-averse individuals dislike stocks! - Overinvesting in fixed income securities 3-Gambling - Famous story of Nobel Prize winner economist 4- Payment Depreciation - takes effect in two ways, based on whether:
  28. 28. Joint Vs. Separate Preference • Political polls for two candidates: - 1st one: 10,000 new jobs, rumors of misconduct - 2nd one: 5,000 new jobs, clean! • When assessing: individually, 2nd candidate wins together , 1st candidate wins! • “Want/Should” explanation • “Evaluability” explanation
  29. 29. Transactional Utility • How much are you willing to pay for a cup of coffee at: - “Sia Boof”! - A fancy cafe’ ? • Acquisition utility & Transactional utility • A 40$ discount for a: A) mouse B) laptop
  30. 30. •Goal Framing •Incomplete Information •Affective Balance Theory •Fuzzy-Trace Theory •Task Framing
  31. 31. Goal Framing Framing goal of activity advantages of participating Or Disadvantages of not participating Wearing Seatbelts For exampl e
  32. 32. Incomplete Information Symmetry ofinformationwhen exists framing disappears •Symmetry of completene ss •Symmetry of incompleten ess
  33. 33. Incomplete Information Asian disease problem ( additive method ) A:200 people will be saved and 400 will die B:1/3 all will be saved, 2/3 will all will die or C:200 people will be saved D:1/3 all will be saved
  34. 34. Brian's mechanism in DM Amygdala OMPFC regulationsemotions
  35. 35. Affective Balance Theory Neural Network Model Short- term memory Long- term memory Dipol e gate Decision
  36. 36. Fuzzy-Trace Theory Cognitive Perspective information Verbatim Gis t memory reasoning
  37. 37. Fuzzy-Trace Theory Asian disease Gain frame Loss frame Sure option "If program A is adopted, 200 people will be saved." "If program C is adopted, 400 people will die." Risky option "If program B is adopted, there is 1/3 probability that 600 people will be saved, and 2/3 probability that no people will be saved." "If program D is adopted, there is 1/3 probability that nobody will die, and 2/3 probability that 600 people will die." Encoded gist of sure option Some people will be saved Some people will die Encoded gist of risky Some people will be saved or Some people will die or no
  38. 38. Task Framing Rephrasing The Task To choose or to reject options Choosing highlighting of positive features Rejecting highlighting of negative features
  39. 39. Task Framing Single-child sole-custody problem Parent A : [ awarded : 36 % denied : 45% ] • Average income • Average health • Average working hours • Reasonable rapport with the child • Relatively stable social life Parent B : [ awarded : 64% Above-average income • Very close relationship with the child • Extremely active in social life • Lots of work-related travel denied : 55% ]
  40. 40. The frames we use to view the world determine what we see, locking us into certain ideas and shutting out new possibilities. Schoemaker and Russo, 2001
  41. 41. Good luck & Be careful!

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