Different ways of presenting identical information that lead to different decisions, particularly when options are framed as gains versus losses relative to a reference point.
Framing effects demonstrate that preferences are not stable—they depend on how choices are presented. The classic example: '90% survival rate' is more appealing than '10% mortality rate' even though they're mathematically identical, because the first frames the reference as death (making survival a gain) while the second frames it as life (making death a loss). Framing effects violate the economic principle of description invariance (that preferences shouldn't change based on how options are described) and show that human decision-making is fundamentally reference-dependent. Understanding framing is essential for both making better decisions and influencing others' choices.
A credit card surcharge (framed as a loss) is less acceptable to consumers than a cash discount (framed as a gain), even though the economic outcome is identical. Retailers exploit this by framing the cash price as a 'discount' rather than the card price as a 'surcharge.'
My preferences are stable regardless of how options are presented—actually, framing powerfully influences choices, even when you're aware of it.
True or False: Consumers find a 'cash discount' more acceptable than a 'credit card surcharge' because discounts save more money than surcharges cost.
Why are patients more likely to choose surgery when told it has a '90% survival rate' versus a '10% mortality rate,' even though these are mathematically identical?
The slow, deliberate, effortful mode of thinking that allocates attention to complex computations, self-control, and conscious reasoning.
Mental ModelThe fast, automatic, intuitive mode of thinking that operates effortlessly and generates impressions, intuitions, and feelings without conscious control.
Mental ModelJudging the frequency or probability of events by how easily examples come to mind, leading to overestimation of vivid or recent events.
Mental ModelJudging probability by how much something resembles a typical case while ignoring base rates, sample size, and statistical principles.
Mental ModelThe tendency to rely too heavily on an initial piece of information (the anchor) when making subsequent judgments, even when the anchor is arbitrary or irrelevant.
Mental ModelThe principle that losses loom psychologically larger than equivalent gains, with losing something feeling roughly twice as bad as gaining the same thing feels good.
PrincipleA descriptive model of decision-making under risk showing that people evaluate outcomes relative to a reference point, are loss-averse, and weight probabilities non-linearly.
FrameworkSystem 1's tendency to construct the most coherent story possible from currently available information without considering what's missing or questions not asked.
PrincipleDifferent ways of presenting identical information that lead to different decisions, particularly when options are framed as gains versus losses relative to a reference point.
A credit card surcharge (framed as a loss) is less acceptable to consumers than a cash discount (framed as a gain), even though the economic outcome is identical. Retailers exploit this by framing the cash price as a 'discount' rather than the card price as a 'surcharge.'
My preferences are stable regardless of how options are presented—actually, framing powerfully influences choices, even when you're aware of it.
Framing Effects is explored in depth in "Thinking, Fast and Slow" by Daniel Kahneman. Distilo provides a deep AI-powered analysis with key insights, audio narration, and practical frameworks.