framing effect

Syllable breakdown

Dictionary meaning

the phenomenon in which the same information, presented in different ways, leads to different choices and judgements, demonstrating that decisions are influenced not only by objective facts but by the cognitive and emotional context — the frame — in which those facts are presented; Kahneman and Tversky's Asian disease problem is the classic demonstration: when a disease is expected to kill 600 people, subjects prefer a certain cure saving 200 lives over a one-third probability of saving 600 — but when the same options are framed as deaths rather than lives saved, subjects prefer the risky option; framing effects pervade financial decision-making: investors respond differently to a 10% chance of losing $1,000 and a 90% chance of gaining $0 depending on how the two outcomes are presented; mutual fund advertising exploits framing by presenting short-term gains in percentage terms and long-term compounding in absolute terms; the framing effect demonstrates that human choice is not purely rational but fundamentally shaped by narrative, presentation, and the cognitive salience of different aspects of a situation

Examples

• The framing effect means consumers are more likely to buy beef described as '90% fat-free' than beef described as '10% fat'.
• Bond investors reacted more negatively to a 2% real return framed as a loss relative to inflation than to the same return framed as positive nominal growth.