Beyond gains and losses: The effect of need on risky choice in framed decisions.

Abstract

Substantial evidence suggests people are risk-averse when making decisions described in terms of gains and risk-prone when making decisions described in terms of losses, a phenomenon known as the framing effect. Little research, however, has examined whether framing effects are a product of normative risk-sensitive cognitive processes. In 5 experiments, it is demonstrated that framing effects in the Asian disease problem can be explained by risk-sensitivity theory, which predicts that decision makers adjust risk acceptance on the basis of minimal acceptable thresholds, or need. Both explicit and self-determined need requirements eliminated framing effects and affected risk acceptance consistent with risk-sensitivity theory. Furthermore, negative language choice in loss frames conferred the perception of high need and led to the construction of higher minimal acceptable thresholds. The results of this study suggest that risk-sensitivity theory provides a normative rationale for framing effects based on sensitivity to minimal acceptable thresholds, or needs.