marginal-utilityHumans are risk liking on area of lost and risk avoiding in area of gain. Hence, changing the frame of reference will change their behavior. That part I understand.
I suppose I too, would pick a gamble where I got 90% chance of not getting shot and 10% chance of getting shot by 1000 bullets, then a non gamble where I got shot for certain with 100, or even 1 bullets. When it rains it pours and small defect might as well be big.
The same way getting 1 million is like getting 10 million because I know I can make $10 million anyway once I got my first 1 million. So assurance matter more than expectancy.
The moral seems that is big change is as preferable as small change and people do not value benefits and dangers too far from status quo.
Some of the experimental results explained in http://en.wikipedia.org/wiki/Framing_effect_(psychology) however is hard to understand.
Specifically, Gätcher et al. (in press) reported 93% of PhD students registered early when presented a loss frame, described as a penalty fee, as opposed to 67% students registering early when presented a positive frame in the form of a discount.
So paying early is less risky than paying late. When we re frame that as lost, we would expect people to take riskier choice, namely paying late. Yet, the experiment shows that 93% of PhD student pay early, which is the saver choice.
exhibited a framing effect in a poll in which the same option was expressed differently. Rugg (as cited in Plous, 1993) discovered that 62% of people disagreed with allowing public condemnation of democracy, but only 46% of people agreed to forbidding public condemnation.
This is another problem. I can’t even understand how not allowing public condemnation and forbidding public condemnation is either risk liking or risk averting. How does sigmoid function affect any of that?
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