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Framing Effects as Violations of Extensionality

  • Sacha Bourgeois-Gironde

    ()

    (IJN - Institut Jean-Nicod - CNRS - Centre National de la Recherche Scientifique - EHESS - École des hautes études en sciences sociales - ENS Paris - École normale supérieure - Paris)

  • Raphaël Giraud

    (CRESE - Centre de REcherches sur les Stratégies Economiques - UFC - UFC - Université de Franche-Comté)

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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Paper provided by HAL in its series Post-Print with number ijn_00432662.

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Date of creation: 2009
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Publication status: Published in Theory and Decision, Springer Verlag, 2009, 67 (4), pp.385-404
Handle: RePEc:hal:journl:ijn_00432662
Note: View the original document on HAL open archive server: http://jeannicod.ccsd.cnrs.fr/ijn_00432662
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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," Economics Series Working Papers 124, University of Oxford, Department of Economics.
  3. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-91, March.
  4. 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.
  5. Arrow, Kenneth J, 1982. "Risk Perception in Psychology and Economics," Economic Inquiry, Western Economic Association International, vol. 20(1), pages 1-9, January.
  6. Barton L. Lipman, 1999. "Decision Theory without Logical Omniscience: Toward an Axiomatic Framework for Bounded Rationality," Review of Economic Studies, Oxford University Press, vol. 66(2), pages 339-361.
  7. Marc Le Menestrel & Luk N. Van Wassenhove, 2001. "The domain and interpretation of utility functions: An exploration," Economics Working Papers 576, Department of Economics and Business, Universitat Pompeu Fabra.
  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. 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).
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