Logically equivalent choices produce different decisions when framed differently (as gains vs. losses, or with different reference points).
A medical treatment with '90% survival rate' is chosen more often than one with '10% mortality rate.' A discount framed as 'save $50' is more appealing than a surcharge framed as 'pay $50 extra,' even when the final price is identical.
Framing is just marketing spin that doesn't affect real preferences—framing systematically changes choices, even for consequential decisions by experts.
Thinking, Fast and Slow
Daniel Kahneman
Outcomes are evaluated relative to a reference point (usually the status quo) rather than in absolute terms, making framing crucial.
People evaluate outcomes relative to a reference point rather than in absolute terms, are loss-averse, show diminishing sensitivity, and overweight small probabilities.
Losses hurt approximately twice as much as equivalent gains feel good, making people risk-averse for gains and risk-seeking for losses.
Outcomes are evaluated relative to a reference point (usually the status quo) rather than in absolute terms, making framing crucial.
Why do framing effects violate rational choice theory?
You're designing a retirement savings program. How would you frame the default option to maximize participation, and why would this framing work?