A remote mountain village of 600 inhabitants is suffering from a lethal plague. The results of two treatment plans, A and B, are given below. Plan A: There is a 100% chance that exactly 200 people survive the plague. Plan B: There is a 33% chance that all 600 people survive the plague. There is a 67% chance that no one survives the plague.

A remote mountain village of 600 inhabitants is suffering from a lethal plague. The results of two treatment plans, One and Two, are given below. Plan One: There is a 100% chance that exactly 400 people will die. Plan Two: There is a 33% chance that no one will die. There is a 67% chance that all 600 people die.

1+2 does not equal 2+1 The Framing Effect and Human Decision Making

Pre 1979: Expected Utility The only logical outcome... Risk Guarantee: low return, high probability Gamble: high return, low probability Probability Comparison: (Value)(Probability)=Util ity Decisi on

Kahneman and tversky Logically examining illogical choices Daniel Kahneman Amos Tversky images from tversky.html Phenomena unexplained by Utility Theory: --Why spend more money on insurance to protect your valuables than the expected utility of their (Value)(Probability of damage/theft) function? --How can the same person choose a hugely uncertain possible gain (i.e. a lottery ticket) and be willing to spend a certain small sum of money to avoid possible future loss (i.e. insurance premiums)? --Why do some investors continue to pour money into failing business ventures even after it is apparent they cannot recoup their losses?

Biases and Heuristic s Prospect THEORY The impact of your status quo Risk Guarantee: low return, high probability Gamble: high return, low probability Probability Comparison: (Value)(Probability)=Util ity Decisi on Perception of Gamble: Gain or Loss? Gain: Risk Seeking Loss: Risk Averse

Framing effect No matter how you cut it, 1/2 is still 1/2... Perception of Gamble: Gain? Loss? Gain: Risk Seeking Loss: Risk Averse How do you feel about: --A medical procedure that has a 90% chance of saving a loved one’s life? How about one with a 1/10 chance of failure? --Birth control that is effective 19/20 times? Birth control that has a 5% failure rate?

my hypothesis A population of college-aged students, when presented with two logically identical options with opposite framings, will be risk averse when the certain outcome is presented as a loss and risk-seeking when the certain outcome is presented as a gain. Further, males, stereotypically more risk-seeking, will choose the riskier option more often, regardless of the framing of the two options.

A remote mountain village of 600 inhabitants is suffering from a lethal plague. The results of two treatment plans, A and B, are given below. Plan A: There is a 100% chance that exactly 200 people survive the plague. (Certain outcome: gain) Plan B: There is a 33% chance that all 600 people survive the plague. There is a 67% chance that no one survives the plague. (Gamble: loss) A remote mountain village of 600 inhabitants is suffering from a lethal plague. The results of two treatment plans, A and B, are given below. Plan A: There is a 100% chance that exactly 400 people will die. (Certain outcome: loss) Plan B: There is a 33% chance that no one will die. There is a 67% chance that all 600 people die. (Gamble: gain) POS NEG

Summary Sheet: Response Data Grouped by Framing without Gender Framing Number and (Percentage) of Respondents Selecting Plan A Number and (Percentage) of Respondents Selecting Plan B Total Number of Respondents in Gender Category POS33 (77%)10 (23%)43 NEG20 (48%)22 (52%)42

TABLE 2: MALE RESPONSES TO THE ISOLATED VILLAGE PROBLEM CATEGORIZED BY POS/NEG FRAMING FramePlan APlan BTotal POS15621 NEG91221 Total241842

TABLE 3: FEMALE RESPONSES TO THE ISOLATED VILLAGE PROBLEM CATEGORIZED BY POS/NEG FRAMING FramePlan APlan BTotal POS18422 NEG Total241842

results Framing effect has a significant effect on the decision- making of the sampled population (p<0.01). If the certain outcome is perceived as a gain, no one is willing to take a risk. If the same certain outcome is perceived as a loss, risk-seeking behavior becomes prevalent. Males chose the riskier treatment plan more frequently than females, though not at levels of statistical significance (likely due to small sample size).

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