The Framing of Decisions and the Psychology of Choice
30 Jan 1981-Science (American Association for the Advancement of Science)-Vol. 211, Iss: 4481, pp 453-458
TL;DR: The psychological principles that govern the perception of decision problems and the evaluation of probabilities and outcomes produce predictable shifts of preference when the same problem is framed in different ways.
Abstract: The psychological principles that govern the perception of decision problems and the evaluation of probabilities and outcomes produce predictable shifts of preference when the same problem is framed in different ways. Reversals of preference are demonstrated in choices regarding monetary outcomes, both hypothetical and real, and in questions pertaining to the loss of human lives. The effects of frames on preferences are compared to the effects of perspectives on perceptual appearance. The dependence of preferences on the formulation of decision problems is a significant concern for the theory of rational choice.
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TL;DR: This research aims to aid risk analysis and policy-making by providing a basis for understanding and anticipating public responses to hazards and improving the communication of risk information among lay people, technical experts, and decision-makers.
Abstract: Studies of risk perception examine the judgements people make when they are asked to characterize and evaluate hazardous activities and technologies. This research aims to aid risk analysis and policy-making by providing a basis for understanding and anticipating public responses to hazards and improving the communication of risk information among lay people, technical experts, and decision-makers. This work assumes that those who promote and regulate health and safety need to understand how people think about and respond to risk. Without such understanding, well-intended policies may be ineffective.
10,068 citations
TL;DR: In this article, the authors focus on the linkages between the industry analysis framework, the resource-based view of the firm, behavioral decision biases and organizational implementation issues, and connect the concept of Strategic Industry Factors at the market level with the notion of Strategic Assets at the firm level.
Abstract: We build on an emerging strategy literature that views the firm as a bundle of resources and capabilities, and examine conditions that contribute to the realization of sustainable economic rents. Because of (1) resource-market imperfections and (2) discretionary managerial decisions about resource development and deployment, we expect firms to differ (in and out of equilibrium) in the resources and capabilities they control. This asymmetry in turn can be a source of sustainable economic rent. The paper focuses on the linkages between the industry analysis framework, the resource-based view of the firm, behavioral decision biases and organizational implementation issues. It connects the concept of Strategic Industry Factors at the market level with the notion of Strategic Assets at the firm level. Organizational rent is shown to stem from imperfect and discretionary decisions to develop and deploy selected resources and capabilities, made by boundedly rational managers facing high uncertainty, complexity, and intrafirm conflict.
8,121 citations
Cites background from "The Framing of Decisions and the Ps..."
...Tversky and Kahneman (1981) offer persuasive examples of how simplified framing (such as isolating alternatives or expressing outcomes relatively) can lead to inconsistent decisions....
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TL;DR: The literature on knowledge acquisition is voluminous and multi-faceted as mentioned in this paper, and so the knowledge acquisition construct is portrayed as consisting of five subconstructs or subprocesses: 1 drawing on knowledge available at the organization's birth, 2 learning from experience, 3 learning by observing other organizations, 4 grafting on to itself components that possess knowledge needed but not possessed by the organization, and 5 noticing or searching for information about the environment and performance.
Abstract: This paper differs from previous examinations of organizational learning in that it is broader in scope and more evaluative of the literatures. Four constructs related to organizational learning knowledge acquisition, information distribution, information interpretation, and organizational memory are articulated, and the literatures related to each are described and critiqued.
The literature on knowledge acquisition is voluminous and multi-faceted, and so the knowledge acquisition construct is portrayed here as consisting of five subconstructs or subprocesses: 1 drawing on knowledge available at the organization's birth, 2 learning from experience, 3 learning by observing other organizations, 4 grafting on to itself components that possess knowledge needed but not possessed by the organization, and 5 noticing or searching for information about the organization's environment and performance. Examination of the related literatures indicates that much has been learned about learning from experience, but also that there is a lack of cumulative work and a lack of integration of work from different research groups. Similarly, much has been learned about organizational search, but there is a lack of conceptual work, and there is a lack of both cumulative work and syntheses with which to create a more mature literature. Congenital learning, vicarious learning, and grafting are information acquisition subprocesses about which relatively little has been learned.
The literature concerning information distribution is rich and mature, but an aspect of information distribution that is central to an organization's benefitting from its learning, namely how units that possess information and units that need this information can find each other quickly and with a high likelihood, is unexplored. Information interpretation, as an organizational process, rather than an individual process, requires empirical work for further advancement. Organizational memory is much in need of systematic investigation, particularly by those whose special concerns are improving organizational learning and decision making.
8,041 citations
Posted Content•
TL;DR: Prospect theory as mentioned in this paper is an alternative to the classical utility theory of choice, and has been used to explain many complex, real-world puzzles, such as the principles of legal compensation, the equity premium puzzle in financial markets, and the number of hours that New York cab drivers choose to drive on rainy days.
Abstract: This book presents the definitive exposition of 'prospect theory', a compelling alternative to the classical utility theory of choice. Building on the 1982 volume, Judgement Under Uncertainty, this book brings together seminal papers on prospect theory from economists, decision theorists, and psychologists, including the work of the late Amos Tversky, whose contributions are collected here for the first time. While remaining within a rational choice framework, prospect theory delivers more accurate, empirically verified predictions in key test cases, as well as helping to explain many complex, real-world puzzles. In this volume, it is brought to bear on phenomena as diverse as the principles of legal compensation, the equity premium puzzle in financial markets, and the number of hours that New York cab drivers choose to drive on rainy days. Theoretically elegant and empirically robust, this volume shows how prospect theory has matured into a new science of decision making.
7,802 citations
Cites background from "The Framing of Decisions and the Ps..."
...It has also been observed with nonmonetary outcomes, such as hours of pain (Eraker & Sox, 1981) and loss of human lives (Fischhoff, 1983; Tversky, 1977; Tversky & Kahneman, 1981)....
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...The same option, however, can be framed or described in different ways (Tversky & Kahneman, 1981)....
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TL;DR: The recent proliferation of research on collective action frames and framing processes in relation to social movements indicates that framing processes have come to be regarded, alongside resource mobilization and political opportunity processes, as a central dynamic in understanding the character and course of social movements.
Abstract: ■ Abstract The recent proliferation of scholarship on collective action frames and framing processes in relation to social movements indicates that framing processes have come to be regarded, alongside resource mobilization and political opportunity processes, as a central dynamic in understanding the character and course of social movements. This review examines the analytic utility of the framing literature for un- derstanding social movement dynamics. We first review how collective action frames have been conceptualized, including their characteristic and variable features. We then examine the literature related to framing dynamics and processes. Next we review the literature regarding various contextual factors that constrain and facilitate framing processes. We conclude with an elaboration of the consequences of framing processes for other movement processes and outcomes. We seek throughout to provide clarifi- cation of the linkages between framing concepts/processes and other conceptual and theoretical formulations relevant to social movements, such as schemas and ideology.
7,717 citations
Cites background or methods from "The Framing of Decisions and the Ps..."
...See Johnston & Klandermans 1995, pp. 85– 106 Gamson WA, Croteau D, Hoynes W, Sasson T. 1992....
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...negotiated processes, not always under the tight control of movement elites, and that employing a particular alignment strategy does not always yield the desired results. Frame transformation, the final strategic alignment process, refers to changing old understandings and meanings and/or generating new ones. Few movement studies deal explicitly with this form of frame alignment. One recent notable exception is White's (1999) participant observation study of a Black feminist collective's...
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...Evidence of this trend can be found (a) in recent edited volumes based on papers presented at social movement conferences (Johnston & Klandermans 1995, Lara˜na et al 1994, McAdam et al 1996, Morris & Mueller 1992); (b) in the almost meteoric increase in articles, chapters, and papers referring to the framing/movement link since the mid-1980s, from only one such reference in theSociological Abstractsin 1986 to 43 in 1998, with almost two thirds of the nearly 250 references during this period occurring since 1994; (c) in the parallel pattern of citations in the three core conceptual articles on framing and social movements (Snow et al 1986, Snow & Benford 1988, 1992) beginning with seven citations in 1990 and increasing to 106 in 1998, with more than half of the over 500 citations appearing after 1995; and (d) in a variety of recent critiques focusing on specific conceptual dimensions of the movement framing literature (Benford 1997, Fisher 1997, Hart 1996, Jasper 1997, Oliver & Johnston 2000, Sherkat 1998, Steinberg 1998, Williams & Benford 2000) or on its relationship to other perspectives (Goodwin & Jasper 1999, Meyer 1999)....
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...Tversky A, Kahneman D. 1981....
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...See della Porta et al 1999, pp. 134– 47 Klandermans B, Goslinga S. 1996....
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References
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TL;DR: This article reported the results of a series of experiments designed to discredit the psychologists' works as applied to economics and suggested that no optimization principles of any sort lie behind even the simplest of human choices and that the uniformities in human choices may result from principles which are of a completely different sort from those that are commonly accepted.
Abstract: A body of data and theory has been developing
within psychology which should be of
interest to economists. Taken at face value the
data are simply inconsistent with preference
theory and have broad implications about
research priorities within economics. The
inconsistency is deeper than the mere lack of
transitivity or even stochastic transitivity. It
suggests that no optimization principles of
any sort lie behind even the simplest of human
choices and that the uniformities in human
choice behavior which lie behind market
behavior may result from principles which are
of a completely different sort from those
generally accepted. This paper reports the
results of a series of experiments designed to
discredit the psychologists' works as applied
to economics.
1,140 citations
Posted Content•
TL;DR: In this paper, the Strotz model is recast to include the control features missing in his formulation, and the individual's control problems are related to those that exist in agency relationships.
Abstract: Although many economists, most notably Strotz, have discussed dynamic inconsistency and precommitment, none have dealt directly with the essence of the problem: self-control. This paper attempts to fill that gap by modeling man as an organization. The Strotz model is recast to include the control features missing in his formulation. The organizational analogy permits us to draw on the theory of agency. We thus relate the individual's control problems with those that exist in agency relationships.
993 citations
Book•
26 Feb 1998
TL;DR: In this paper, the authors define perfect rationality as "Beyond Gradient-Climbing" in the theory of rational behaviour, and present a set of games without solutions.
Abstract: Preface to the revised edition Preface and acknowledgements Part I. Perfect Rationality: Beyond Gradient-Climbing: 1. Introduction 2. The locally maximizing machine 3. The globally maximizing machine 4. Strategic behaviour in animals and men 5. Functionalist explanation in sociology Part II. Imperfect Rationality: Ulysses and the Sirens: 1. Introduction 2. Towards a definition 3. Pascal 4. Descartes 5. Inconsistent time preferences 6. Endogenous change of preferences 7. Precommitment in animal behaviour 8. Abdication from power 9. Some conclusions and further questions Part III. Problematic Rationality: Some Unresolved Problems in the Theory of Rational Behaviour: 1. Introduction 2. Games without solutions 3. Lexicographic preferences 4. Subjective probability 5. Maximizing, satisficing and natural selection 6. Traditional behaviour and random behaviour 7. Explaining altruism 8. Inconstancy 9. Paradox 10. And so what Part IV. Irrationality: Contradictions of the Mind: 1. Introduction 2. Hate 3. Love 4. Self-deception References Index.
842 citations
TL;DR: In this article, the authors report results of experiments designed to test the claim of psychologists that expected utility theory does not provide a good descriptive model and the deviation from tested theory is that, in revising beliefs, individuals ignore prior or base-rate information contrary to Bayes rule.
Abstract: Results of experiments designed to test the claim of psychologists that expected utility theory does not provide a good descriptive model are reported. The deviation from tested theory is that, in revising beliefs, individuals ignore prior or base-rate information contrary to Bayes rule. Flaws in the evidence in the psychological literature are noted, an experiment avoiding these difficulties is designed and carried out, and the psychologists' predictions are stated in terms of a more general model. The psychologists' predictions are confirmed for inexperienced or financially unmotivated subjects, but for others the evidence is less clear.
703 citations