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Framing Effects in the Elicitation of Risk Aversion: An Experimental Study

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  • Luca Congiu

    (University of Insubria)

Abstract

In most risk elicitation tasks, lotteries are presented through a verbal description stating the outcomes and their likelihoods (e.g., “Win $5 with probability 10%”, “1 in 10 chance to win $5”), sometimes accompanied by a pictorial representation (a pie chart or bar graph). Literature on risk communication suggests that alternative but supposedly equivalent numeric formats (e.g., percentages vs ratios) and pictorial displays (e.g., continuous vs discrete) may lead to a different perception of risk and concern for it. The present experiment (N = 95) tests for numeric and pictorial framing effects in a multiple price list (MPL), where risk information is presented either as percentages (“10%”) or as ratios (“1 out of 10”) and is accompanied by either two-slice or ten-slice pies. Results show that neither the numeric framing (adopting ratios) nor the pictorial framing (slicing pies) significantly altered per se the average elicited risk aversion. Nonetheless, the pictorial framing significantly reduced the elicited risk aversion for those participants who focused on the probability of the lottery’s high outcome in their decisions.

Suggested Citation

  • Luca Congiu, 2023. "Framing Effects in the Elicitation of Risk Aversion: An Experimental Study," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 9(1), pages 321-352, March.
    • Handle: RePEc:spr:italej:v:9:y:2023:i:1:d:10.1007_s40797-022-00187-2
    DOI: 10.1007/s40797-022-00187-2
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    More about this item

    Keywords

    Framing effect; Risk communication; Risk aversion; Multiple price list; Lottery choice experiment;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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