. Narrow framing = treats each decision separately. It increases the emotional reaction to losses and decreases the willingness to take risks. Encourages a focus on short-term outcomes and this results in frequent changes of decisions and reduced performance

. Broad framing = treats decisions as part of a portfolio or group approach. It blunts the emotional reaction to losses and increases the willingness to take risks. Encourages a focus on long-term outcomes and usually results in better decisions and outcomes.

NB The pain of frequent small losses exceeds the pleasure of equally frequent small gains

. Emotionally loaded words quickly attract attention; with bad words, like crime, war, etc, attracting attention faster than do words like peace, love, etc. Even though there is no real threat, words can create a picture of an event. The mere reminder of a bad event is treated as threatening and can evoke an emotional reaction. For example, statements of opinion that strongly disagree with your own can be seen as a threat.

. Some examples on the importance of framing, ie words used

- the results of a soccer match, eg "Italy won"/ "France lost". Do these statements have the same meaning? They can evoke markedly different emotional responses and can have different meanings

- lotteries - a bad outcome is more acceptable if it is framed as the cost of lottery ticket that did not win than if it is simply described as losing a gamble, ie losses evoke stronger negative feelings than costs

- fuel stations - charge different prices for cash or credit purchases, ie cash is cheaper. It is called a cash discount, not a credit surcharge. People will more readily forego a discount and pay a surcharge

- "...The two may be economically equivalent, but they are not emotionally equivalent..."

- Daniel Kahneman 2012

- mortality - 90% survival sounds encouraging while 10% mortality sounds frightening

- opting in and opting out clauses - it is the best indicator of whether people will donate organs or not. The opt-out has a significantly higher adoption rate than the opt-in situation

. Choices are not reality-bound. The tendency to approach or avoid are revoked by the words used, ie loss v. gain, keep v. lose, etc. Our preferences are frame-bound rather than reality-bound. Risk-averse and risk-seeking preferences are not reality-bound. Preferences between the same objective outcomes with different formulations.

. Framing effect = people are more likely to choose the sure thing in the keep frame and more likely to accept the gamble than the loss. Even professionals react the same way as non-professionals. Your moral feelings are attached to the frames, ie their description of reality rather than to reality itself.

. Broadening frames leads to more rational decisions; conversely, narrowing frames leads to less rational decisions

. Cost-loss discrepancy = something is framed as a choice between a sure loss and a risk of greater loss, eg, insurance; losses are more aversive than costs

. Dead-loss effect = an individual's subjective state can be improved by framing negative outcomes as costs rather than as losses, eg paying a sport's membership fee and then experiencing an injury that means playing the sport is painful, many people will continue to endure the pain and play the sport as they have paid the membership fee (the fee would be a dead loss if the subscriber stopped playing)


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