Risky‐choice framing and rational decision‐making

Abstract

AbstractThis article surveys the latest research on risky‐choice framing effects, focusing on the implications for rational decision‐making. An influential program of psychological research suggests that people's judgements and decisions depend on the way in which information is presented, or ‘framed’. In a central choice paradigm, decision‐makers seem to adopt different preferences, and different attitudes to risk, depending on whether the options specify the number of people who will be saved or the corresponding number who will die. It is standardly assumed that such responses violate a foundational tenet of rational decision‐making, known as the principle of description invariance. We discuss recent theoretical and empirical research that challenges the dominant ‘irrationalist’ narrative. These approaches typically pay close attention to how decision‐makers represent decision problems (including their interpretation of numerical quantifiers or predicate choice) and they highlight the need for a more robust characterization of the description invariance principle. We conclude by indicating avenues for future research that could bring us closer to a complete—and potentially rationalizing—explanation of framing effects.