Testing the internal consistency of the standard gamble in ‘success’ and ‘failure’ frames

Abstract

Decision making behaviour has often been shown to vary following changes in the way in which choice problems are described (or ‘framed’). Moreover, a number of researchers have demonstrated that the standard gamble is prone to internal inconsistency, and loss aversion has been proposed as an explanation for this observed bias. This study attempts to alter the influence of loss aversion by framing the treatment arm of the standard gamble in terms of success (where we may expect the influence of loss aversion to be relatively weak) and in terms of failure (where we may expect the influence of loss aversion to be relatively strong). The objectives of the study are (1) to test whether standard gamble values vary when structurally identical gambles are differentially framed, and (2) to test whether the standard gamble is equally prone to internal inconsistency across the two frames. The results show that compared to framing in terms of treatment success, significantly higher values were inferred when the gamble was framed in terms of treatment failure. However, there was no difference in the quite marked levels of internal inconsistency observed in both frames. It is possible that the essential construct of the standard gamble induces substantial and/or widespread loss aversion irrespective of the way in which the gamble is framed, which offers a fundamental challenge to the usefulness of this value elicitation instrument. It is therefore recommended that further tests are undertaken on more sophisticated corrective procedures designed to limit the influence of loss aversion.