Tilburg University Framing and communication

Framing effects of different sorts are ubiquitous in the decisionmaking literature and beyond. Framing refers to situations in which decision makers respond differently to problems that, though differently framed (formulated), are considered equivalent from a normative analytical viewpoint. For instance, stating that an operation’s probability of success is . 90 corresponds to stating that its probability of failure is . 10. Although the two statements are logically equivalent they can, in daily life, convey (often tacitly) different information. Framing effects are important from both theoretical and applied perspectives. Concerning the theoretical facet, framing effects constitute a challenge to rational choice theory because they can lead to inconsistent choice behavior. The incompatibility between framing effects and utility theory was among the incentives that led to the development of prospect theory (Kahneman & Tversky, 1979), which is currently considered (among economists and researchers of judgment and decision making) to be the leading theory of choice. Framing effects play a vital role in applied and practical decision making in various domains such as medicine, marketing, law and policy making – to mention just a few. For instance, the likelihood that a patient will decide to undergo an operation may differ considerably, depending on whether she is informed about the likelihood of success (i.e., 90% chance it will succeed) or failure (i.e., 10% chance it will fail). More generally, there is a fundamental difference between framing outcomes in terms of gains and losses, and this difference has both theoretical and practical implications. In a similar vein, risk and uncertainty can be communicated in different ways. There is a basic difference framing and communication 15 between formulating uncertainty in numerical terms (i.e., 70% chance that the operation will be successful) or in verbal (i.e., “it is quite likely that the operation will be successful”) terms. Verbal probabilities carry not only chance information but also an additional tacit recommendation of whether or not a certain outcome or actions are desirable. Section 2 of this paper describes different sorts of framing effects and examines its importance from both a theoretical and an applied viewpoint. Many of the examples described are taken from the health sector, public policy, and marketing, all of which are relevant for the insurance companies and pension funds. There are different sorts of framing effects. Section 3 describes several alternative classifications based on the mechanisms that supposedly drive these effects. The following section offers an analysis of two major approaches to the study of framing effects. Briefly, one line of research, termed the “the listener’s” approach solely examines how a listener (hearer) of a message interprets a message enclosed in a particular frame and acts accordingly. An alternative framework, based on Grice’s (1975, 1978) logic of conversation, examines messages as an exchange taking place between a speaker (the message sender) and a listener (the message receiver). Following this approach, speakers do not choose a frame randomly. Rather, different frames carry additional tacit information that the hearer is attempting to unveil. In gametheoretic terminology, this approach perceives communication as a cooperation game. Section 5 is devoted entirely to framing effects studied in the context of pension funds. For instance, an employee’s contributions (premium payments) to his/her retirement fund can be framed as either being part of the salary, or as representing a