Framing Effects, Risky Choice And Risk - 1572 Words

Framing is one of the most notable cognitive biases. It differs individuals’ judgments toward an identical problem by presenting it in different ways. In general, we expect decisions made under framing effects are deviated from the norm and rational judgment due the adoption of mental frames, which created the illusion for individuals. Different types of framing have been identified, for example, Hallahan (1999) classified framing into seven different types, including situations, attributes, choices, actions, issues, responsibility, and news. (Levin, Schneider and Gaeth, 1998) have classified framing effects into three major types: risky choice, attribute and goal framing. Some other types of framing have been discovered after these classifications published; number of size framing and framing risk in either absolute or relative terms are the most well known. This paper will be focusing on the attribute, risky choice and risk in absolute or relative terms framing effects, and showing how they influence business and investment decisions with evidence. Attribute framing influences individuals’ judgments towards an object or event by presenting it in a positive or negative manner, while holding its value constant. According to Levin, Schneider and Gaeth (1998) objects described in positive manner are generally evaluated more favorably than objects described in negative manner. For instance, a study found that beef described as â€Å"75% fat free† was given higher ratings than beefShow MoreRelatedThe Contributions Of The Endowment Effect Essay1600 Words   |  7 PagesThe endowment effect has been a heavily studied subject since the 1980’s when it was first described by Richard Thaler. This effect describes the phenomena where the buying and selling prices of an object have major differences. 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