Framing Effect Application: A Critical View Of Rationality

Since economics studies on individual preferences, it is a branch of science based on human beings. Most of the economy and finance theories are based on the idea that, an individual uses all of the available information rationally and takes into consideration in a right manner while making a decision. In recent years, some opinions have emerged, proposing rationality assumption is solely insufficient to explain the determination of consumer preferences. An individual is a social being having feelings and interacting with environment. Therefore, every subject including human beings inevitably includes environmental and psychological factors. In this manner, presentation of events changes decisions, besides features such as personality, gender, age and education . “Framing Effect”, which can be defined as the differentiation of decisions as presentation of information changes with visual elements, different words or presentation style, constitutes the core of this study. Effects of “framing” on the preferences of individuals have been analyzed, considering the study of Kahneman and Tversky named “Asian Disease” which is vital in the economic literature. This study, concentrates on outcomes of an empirical study, applied on individuals between ages 18 and 44, living in Istanbul and at least high school educated. In this study, it is analyzed whether randomly applied positive and negative frames create systematic effects based on gender and age over decisions.