Group A Group Members: Shahram Moradi Ali Mansouri Under Supervision of Dr. M.T. Isaei

Content IntroductionOutcome FramingLoss AversionStructure FramingTask FramingConclusion

Introduction Introduction What is a Frame Outcome Framing Loss Aversion Structure Framing Task Framing Conclusion

What is a Frame? Introduction What is a Frame Outcome Framing Loss Aversion Structure Framing Task Framing Conclusion

To Frame, or To Be Framed? Previous patterns & Experience Norms & Expectations Desire for simplicity Habits Previous patterns & Experience Norms & Expectations Desire for simplicity Habits Introduction What is a Frame Outcome Framing Loss Aversion Structure Framing Task Framing Conclusion

Introduction What is a Frame Outcome Framing Loss Aversion Structure Framing Task Framing Conclusion

Outcome Framing Introduction What is a Frame Outcome Framing Loss Aversion Structure Framing Task Framing Conclusion Framing as Gains or Losses Framing as aggregate or disaggregate Quantities Framing by scaling the outcome in a different currency

Framing as Gains or Losses Asian Disease Which is expected to kill 600 people Survey A B Problem 1 Introduction What is a Frame Outcome Framing Loss Aversion Structure Framing Task Framing Conclusion

Asian Disease Which is expected to kill 600 people Survey C D Problem 2 Different Framing of Outcomes Risk – Aversion to Risk - Seeking Risk – Aversion to Risk - Seeking Introduction What is a Frame Outcome Framing Loss Aversion Structure Framing Task Framing Conclusion

Risk Situation Profit Risk Averse Loss Risk Seek Introduction What is a Frame Outcome Framing Loss Aversion Structure Framing Task Framing Conclusion

Prospect Theory concave convex Risk- Seeking Behavior Risk- Aversion Behavior Risk- Aversion Behavior Introduction What is a Frame Outcome Framing Loss Aversion Structure Framing Task Framing Conclusion

Insurance Actual loss Loss with high probability INSURANCE ???

PAD strategy (Pennies-a-Day) Enjoy riding your own motorcycle for only $1 a day!!! Introduction What is a Frame Outcome Framing Loss Aversion Structure Framing Task Framing Conclusion

Loss Aversion and Outcome Framing Effects Survey A B 0.50 Problem 3 Introduction What is a Frame Outcome Framing Loss Aversion Structure Framing Task FramingConclusion

Survey A B 0.50 Problem 4 You are given $3,000 Loss Aversion Reduction in Risk - Aversion Reduction in Risk - Aversion Introduction What is a Frame Outcome Framing Loss Aversion Structure Framing Task FramingConclusion

The Endowment effect An immediate consequence of Loss Aversion People’s willingness to demand more than to pay for something Introduction What is a Frame Outcome Framing Loss Aversion Structure Framing Task FramingConclusion

The Sunk-Cost Effect Some Past Investment Continue Introduction What is a Frame Outcome Framing Loss Aversion Structure Framing Task FramingConclusion

Advantages and Disadvantages Introduction What is a Frame Outcome Framing Loss Aversion Structure Framing Task FramingConclusion JobSocial contactDaily travel time Present jobIsolated for long stretches10 Job XLimited contacts with others20 Job YModerately sociable60 JobSocial contactDaily travel time Present jobMuch pleasant social interaction80 Job XLimited contacts with others20 Job YModerately sociable60 Gain Loss Gain

Other Outcome Framing Effects Introduction What is a Frame Outcome Framing Loss Aversion Structure Framing Task FramingConclusion

Structure Framing The size and arrangement of the decision maker’s view Introduction What is a Frame Outcome Framing Loss Aversion Structure Framing Task FramingConclusion

The Integration and Segregation of Information Survey E F Problem Introduction What is a Frame Outcome Framing Loss Aversion Structure Framing Task FramingConclusion

Survey Problem 6 A B C D % 73 %0%0 %0%0 ADE %3%3 %3%3 % 100 BCF Introduction What is a Frame Outcome Framing Loss Aversion Structure Framing Task FramingConclusion

Introduction What is a Frame Outcome Framing Loss Aversion Structure Framing Task FramingConclusion Sequential Framing of Contingent Events Problem 7 Two Stage Game Problem 8 %74 %26 %42 %58

Task Framing Decision as Reject options from the set Choose one option from the set Result Introduction What is a Frame Outcome Framing Loss Aversion Structure Framing Task FramingConclusion

Task Framing Problem 9 Sole–Custody of child Parent A : Average income Average health Average working hours Reasonable rapport with the child Relatively stable social life Parent B : Above-Average income Very close relationship with the child Extremely active in social life Lots of work-related travel Minor health problems %36 %64 %55 %45 Award Deny Introduction What is a Frame Outcome Framing Loss Aversion Structure Framing Task FramingConclusion

conclusion  Framing matters not only in experimental investigations, but also in the real world  People accept any Frame that is presented to them passively  Looking Differently to subjects will result in Different decisions Introduction What is a Frame Outcome Framing Loss Aversion Structure Framing Task FramingConclusion