How does the framing effect influence individual choices, and provide a concrete example of how the same information presented differently can lead to varied decisions?
The framing effect is a cognitive bias that describes how the way information is presented, or "framed," significantly influences an individual's choices and decisions, even when the underlying information is objectively the same. The framing effect demonstrates that human decision-making is not solely based on rational analysis but is also highly susceptible to the context and presentation of information. It highlights how subtle changes in wording, phrasing, or perspective can alter how we perceive options and the subsequent choices we make. The effect is related to loss aversion as it often plays with the idea of gains and losses and how they are perceived. It affects our ability to act rationally and make the correct choice.
The way the same information is framed will influence whether it is perceived as a potential gain, a potential loss, or simply as neutral information. For example, if a medical treatment is presented with a 90% success rate, it's framed as a gain and people are more likely to consider it. However, if the same treatment is presented with a 10% failure rate, it is framed as a potential loss, and people are more reluctant to pursue that treatment. The objective information is the same in both cases (a 90% chance of success means a 10% chance of failure), but the presentation of the information has a profound effect on the decision. The negative framing will often result in a more extreme reaction than the positive framing, due to loss aversion.
Another way that framing influences decisions is through emphasizing different aspects of a situation. For instance, a product could be presented as "95% fat-free," which focuses on the positive (lack of fat) and is likely to appeal to health-conscious consumers. Alternatively, the same product could be framed as containing "5% fat," which emphasizes the negative (presence of fat). Though both framings reflect the same nutritional composition, they can evoke different emotional responses and purchasing behaviors, with the "95% fat-free" being more positively perceived. This works because people tend to focus on the information that is highlighted and might ignore the other information.
Framing also affects our choices when we are presented with options that are labeled as "gains" or "losses" relative to a reference point. For example, imagine a situation where you are offered a discount: you are choosing between receiving either a 10 dollars discount on a product that costs 100 dollars or a 10% discount on the same product. A 10 dollars discount sounds more attractive, even though the two are the same, and the 10% discount is also a 10 dollars discount on a 100 dollars product. Because you are choosing between two gains, it doesn't really affect your perception very much. However, if the choice was between avoiding paying a 10 dollar penalty versus avoiding paying 10% of a product as a penalty, then you will perceive the situation as a potential loss, not a potential gain. As people are more loss averse, then you are more likely to choose the 10 dollar penalty, even though the two are still objectively the same.
A concrete example to illustrate how framing can influence decision is a classic experiment called the "Asian Disease Problem" where participants are presented with the following scenario: "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 that the exact scientific estimates of the consequences of the programs are as follows."
In the first scenario:
A) If Program A is adopted, 200 people will be saved.
B) If Program B is adopted, there is a one-third probability that 600 people will be saved and a two-thirds probability that no people will be saved.
In this frame, most people tend to choose Program A, as it offers a definite gain (saving 200 lives), which is something people prefer.
In the second scenario the same problem is reframed as:
C) If Program C is adopted, 400 people will die.
D) If Program D is adopted, there is a one-third probability that nobody will die, and a two-thirds probability that 600 people will die.
This framing now shifts the focus towards losses rather than gains. Most people tend to choose Program D, since the idea of losing something is more painful than the idea of missing out on a gain, which we talked about previously in relation to loss aversion. Programs A and C are objectively identical, as are B and D. Yet, framing this identical information as a gain or a loss shifts the perspective and the decision that people make. This experiment clearly demonstrates how the same information can result in drastically different choices depending on how it is framed due to the framing effect. This is not an objective choice as both A and C are exactly the same, as are B and D.