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Framing and stakes: A survey study of decisions under uncertainty

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  • Baucells, Manel

    ()
    (IESE Business School)

  • Rata, Cristina

    (IESE Business School)

Abstract

Using a survey study of 261 decisions under uncertainty, we explore the factors that explain risk taking behavior and those that predict the importance of a decision. We also examine the relationship between framing and status quo, the similarity between monetary and non-monetary decisions, as well as the similarities and differences among our three subject groups (Undergraduates, MBAs and Executives). We find that framing, domain, and probability of success have a strong influence on the probability of taking risks. Other factors, such as group, importance of a decision, and whether the consequences are monetary or not, do not seem to influence risk attitudes. Our analysis of importance of a decision highlights the frequency with which a decision is taken as a key variable. Our results suggest that the cumulative effects of unimportant and frequent decisions are greater than the cumulative effects of very important and infrequent decisions.

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Bibliographic Info

Paper provided by IESE Business School in its series IESE Research Papers with number D/568.

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Length: 34 pages
Date of creation: 21 Sep 2004
Date of revision:
Handle: RePEc:ebg:iesewp:d-0568

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Postal: IESE Business School, Av Pearson 21, 08034 Barcelona, SPAIN
Web page: http://www.iese.edu/
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Related research

Keywords: Decision making under uncertainty; Framing; Importance and frequency of decisions;

References

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  1. Manel Baucells & Franz H. Heukamp, 2006. "Stochastic Dominance and Cumulative Prospect Theory," Management Science, INFORMS, vol. 52(9), pages 1409-1423, September.
  2. Kuhberger, Anton & Schulte-Mecklenbeck, Michael & Perner, Josef, 2002. "Framing decisions: Hypothetical and real," Organizational Behavior and Human Decision Processes, Elsevier, vol. 89(2), pages 1162-1175, November.
  3. Beetsma, Roel & Schotman, Peter C, 1998. "Measuring Risk Attitudes in a Natural Experiment: Data from the Television Game Show LINGO," CEPR Discussion Papers 1893, C.E.P.R. Discussion Papers.
  4. Camerer, Colin F & Hogarth, Robin M, 1999. "The Effects of Financial Incentives in Experiments: A Review and Capital-Labor-Production Framework," Journal of Risk and Uncertainty, Springer, vol. 19(1-3), pages 7-42, December.
  5. Mohammed Abdellaoui, 2000. "Parameter-Free Elicitation of Utility and Probability Weighting Functions," Management Science, INFORMS, vol. 46(11), pages 1497-1512, November.
  6. Paul C. Nutt, 1998. "How Decision Makers Evaluate Alternatives and the Influence of Complexity," Management Science, INFORMS, vol. 44(8), pages 1148-1166, August.
  7. Camerer, Colin F., 1998. "Prospect Theory in the Wild: Evidence From the Field," Working Papers 1037, California Institute of Technology, Division of the Humanities and Social Sciences.
  8. Samuelson, William & Zeckhauser, Richard, 1988. " Status Quo Bias in Decision Making," Journal of Risk and Uncertainty, Springer, vol. 1(1), pages 7-59, March.
  9. Fagley, N. S. & Miller, Paul M., 1997. "Framing Effects and Arenas of Choice: Your Money or Your Life?," Organizational Behavior and Human Decision Processes, Elsevier, vol. 71(3), pages 355-373, September.
  10. Paul J. H. Schoemaker, 1990. "Are Risk-Attitudes Related Across Domains and Response Modes?," Management Science, INFORMS, vol. 36(12), pages 1451-1463, December.
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