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Framing effects as violations of extensionality

  • Sacha Bourgeois-Gironde

    ()

  • Raphaël Giraud

    ()

Framing effects occur when different descriptions of the same decision problem give rise to divergent decisions. They can be seen as a violation of the decisiontheoretic version of the principle of extensionality (PE). The PE in logic means that two logically equivalent sentences can be substituted salva veritate. We explore what this notion of extensionality becomes in decision contexts. Violations of extensionality may have rational grounds. Based on some ideas proposed by the psychologist Craig McKenzie and colleagues, we contend that framing effects are justified when the selection of one particular frame conveys choice relevant information. We first discuss this idea from a philosophical point of view, and proceed next to formalize it first in the context of the Bolker–Jeffrey decision theory. Finally, we extend the previous analysis to non-expected utility theories using the Biseparable Preference model introduced by Ghirardato and Marinacci (2001) and therefore show that the analysis is independent of the assumptions of Bayesian decision theory.

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File URL: http://hdl.handle.net/10.1007/s11238-009-9133-7
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Article provided by Springer in its journal Theory and Decision.

Volume (Year): 67 (2009)
Issue (Month): 4 (October)
Pages: 385-404

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Handle: RePEc:kap:theord:v:67:y:2009:i:4:p:385-404
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  1. Paolo Ghirardato & Massimo Marinacci, 2000. "Risk, Ambiguity and the Separation of Utility and Beliefs," Econometric Society World Congress 2000 Contributed Papers 1143, Econometric Society.
  2. Natalie Gold & Christian List, 2002. "Framing as Path-Dependence," Microeconomics 0211016, EconWPA.
  3. Amos Tversky & Daniel Kahneman, 1979. "Prospect Theory: An Analysis of Decision under Risk," Levine's Working Paper Archive 7656, David K. Levine.
  4. Marc Le Menestrel & Luk Van Wassenhove, 2001. "The Domain and Interpretation of Utility Functions: An Exploration," Theory and Decision, Springer, vol. 51(2), pages 329-349, December.
  5. Tversky, Amos & Kahneman, Daniel, 1992. " Advances in Prospect Theory: Cumulative Representation of Uncertainty," Journal of Risk and Uncertainty, Springer, vol. 5(4), pages 297-323, October.
  6. Raphaël Giraud, 2004. "Framing under risk : Endogenizing the Reference Point and Separating Cognition and Decision," Cahiers de la Maison des Sciences Economiques bla04090, Université Panthéon-Sorbonne (Paris 1).
  7. Lipman, Barton L, 1999. "Decision Theory without Logical Omniscience: Toward an Axiomatic Framework for Bounded Rationality," Review of Economic Studies, Wiley Blackwell, vol. 66(2), pages 339-61, April.
  8. Marc Menestrel & Bertrand Lemaire, 2006. "Ratio-Scale Measurement with Intransitivity or Incompleteness: The Homogeneous Case," Theory and Decision, Springer, vol. 60(2), pages 207-217, 05.
  9. Arrow, Kenneth J, 1982. "Risk Perception in Psychology and Economics," Economic Inquiry, Western Economic Association International, vol. 20(1), pages 1-9, January.
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