What is the framing effect in economics?

Because of the framing effect, the way information is presented to us influences how attractive a proposition is.

Suppose you are considering joining a gym. A membership at £500 per year sounds like a considerable investment and might prevent you from signing up immediately. However, if they tell you it costs just £1.37 per day and emphasize that this is less than the cost of a cup of coffee, you might think it’s a great offer, even though in reality both offers cost you the same.

What Is the Framing Effect? | Definition & Examples

Frequently asked questions: Research bias

What is selective perception?: Selective perception is the unconscious process by which people screen, select, and notice objects in their environment. During this process, information tends to be selectively perceived in ways that align with existing attitudes, beliefs, and goals.

Although this allows us to concentrate only on the information that is relevant for us at present, it can also lead to perception bias. For example, while driving, if you become hyper-focused on reaching your exit on a highway, your brain may filter visual stimuli so that you can only focus on things you need to notice in order to exit the highway. However, this can also cause you to miss other things happening around you on the road.
What is the framing effect in polling?: In survey research, such as political polling, the way questions are worded or the order in which answers are presented can influence how respondents answer the questions. This is called the framing effect.

For example, if voters are asked to select which of two candidates they plan to vote for, the order in which the candidates are listed affects the percentage of respondents selecting each candidate. Recognising the potential for research bias, researchers typically rotate which major candidate is listed first and which is listed second.
What is the framing effect in advertising?: The framing effect is often used in advertising to positively influence consumer choice.

One common type of frame is ‘gain framing‘. This shows consumers how they are going to benefit from a product or service. For example, dental care product advertisements use gain framing to display the benefits of using their product: white teeth, healthy gums, fresh breath, etc.

Apart from the obvious benefits, ads using the framing effect often imply other benefits, such as how a better-looking smile makes one more attractive to potential dating partners.
What is the opposite of optimism bias?: The opposite of optimism bias is pessimism bias. Optimism bias occurs when we overestimate our chances of experiencing positive events in our lives, while pessimism bias occurs when we overestimate our chance of experiencing negative events.

For example, pessimism bias could cause someone to think they are going to fail an exam, even though they are well prepared and get good grades.
What is a positive illusion?: A positive illusion is a form of self-deception under which people have inflated, favorable attitudes about themselves or others close to them.

The most common positive illusions involve:

Exaggerating one’s positive traits

Overestimating one’s degree of control in life

Harboring overly optimistic beliefs about future events (also called optimism bias or positivity bias).
What is the planning fallacy?: The planning fallacy refers to people’s tendency to underestimate the resources needed to complete a future task, despite knowing that previous tasks have also taken longer than planned.

For example, people generally tend to underestimate the cost and time needed for construction projects. The planning fallacy occurs due to people’s tendency to overestimate the chances that positive events, such as a shortened timeline, will happen to them. This phenomenon is called optimism bias or positivity bias.
What is a self-fulfilling prophecy?: A self-fulfilling prophecy is a belief about a future event that leads people to act a certain way, ultimately bringing about the expected outcome. In other words, we cause something to happen just because we expect it.

This suggests that beliefs have the power to alter people’s behaviour in such a way that they become a new reality in the end. Optimism bias can create a self-fulfilling prophecy: when we expect positive things, we are more likely to align our actions with this belief and try harder to influence the outcome.
What is myside bias?: Myside bias is a type of cognitive bias where individuals process information in a way that favors their prior beliefs and attitudes. It occurs when people search for, interpret, and recall information that confirms their opinions, and refute opinions different from their own—such as selecting news sources that agree with one’s political affiliation, while ignoring any opposing arguments from other sources.

Myside bias is closely related to confirmation bias. Although some researchers use the terms interchangeably, others use myside bias to refer to the tendency of processing information that supports one’s own position.
What is the difference between availability bias vs confirmation bias?: Although both are common types of cognitive bias, they refer to different ways of processing information.

The availability bias (or availability heuristic) refers to the tendency people have to rely on information that is easier to recall when faced with a decision.

Confirmation bias is the tendency to selectively search for or interpret information in a way that confirms one’s preconceived ideas.

In other words, the availability heuristic gives preference to information that is easy to recall, while confirmation bias gives preference to information that aligns with our existing beliefs. Even though they are different, they both cause us to focus on only a subset of information.
Why is perception bias a problem?: Perception bias is a problem because it prevents us from seeing situations or people objectively. Rather, our expectations, beliefs, or emotions interfere with how we interpret reality. This, in turn, can cause us to misjudge ourselves or others. For example, our prejudices can interfere with whether we perceive people’s faces as friendly or unfriendly.
What is an everyday life example of perception bias?: A real-life example of perception bias is the false consensus effect. Because we spend most of our time with friends, family, and colleagues who share the same opinions or values we do, we are often misled to believe that the majority of people think or act in ways similar to us. This explains, for instance, why some people take office supplies home: they may genuinely feel that this behavior is more common than it really is.
What is the difference between correspondence bias and fundamental attribution error?: Correspondence bias and fundamental attribution error were often seen as interchangeable in the past. However, researchers have recently proposed that there is a subtle difference between the two.

Correspondence bias refers to the fact that behavior is often viewed as a reflection of a person’s character. In other words, we believe that a person’s behavior reflects stable internal qualities, even though it was actually caused by the situation.
The fundamental attribution error refers to the idea that people fundamentally ignore or underestimate situational influences on others’ behavior.

Although people often commit the fundamental attribution error, they do not necessarily fall for correspondence bias at the same time. Only when we take the fundamental attribution error one step further and judge a person’s character from their actions do we display correspondence bias.
Why is correspondence bias a problem?: Correspondence bias is a problem because it can cause us to make incorrect judgments about other people’s behaviors. This can lead to misunderstandings that can negatively affect our relationship with them. When we overlook the situation and jump to conclusions about an individual’s character, it is also easier to justify reacting to them aggressively.

In a wider social context, if we ignore the situational factors that might have pushed someone to behave a certain way, we may also ignore systemic factors, like discrimination. For example, some people attribute poverty and unemployment to individuals rather than to social conditions.
What is a real-life example of correspondence bias?: A real-life example of correspondence bias is how we think about people who cut in line. For example, you are waiting in line at the airport and someone cuts in front of you at the security checkpoint. Because of correspondence bias, your immediate reaction is to feel annoyed and think that the person must be entitled and rude. In reality, this person may never cut into lines and they are doing this only because they are about to miss their plane, which they are taking to visit a sick family member.
What is a real-life example of vividness bias?: A real-life example of vividness bias can often be observed in the outcome of business negotiations. Price is usually the most vivid information, while other aspects, such the complexity of implementation, or the time needed to complete the project, might be ignored.
Why is vividness bias important?: Vividness bias is important because it can affect our decisions and negotiations. It causes us to assign more weight to vivid information, like a perception of prestige, rather than other factors that, upon greater reflection, are more important to us. As a result, we get distracted and lose sight of our goals and priorities.
What is the vividness effect in communication?: The vividness effect in communication is the persuasive impact that vivid information is thought to have on opinions and behaviors. In other words, information that is vivid, concrete, dramatic, etc., is more likely to capture our attention and sway us into believing or doing one thing rather than another. On the contrary, information that is dull or abstract is not so effective. The vividness effect relates to the vividness bias.
Why are placebos used in research?: Placebos are used in medical research for new medication or therapies, called clinical trials. In these trials some people are given a placebo, while others are given the new medication being tested.

The purpose is to determine how effective the new medication is: if it benefits people beyond a predefined threshold as compared to the placebo, it’s considered effective.
How does attrition threaten external validity?: Attrition bias can skew your sample so that your final sample differs significantly from your original sample. Your sample is biased because some groups from your population are underrepresented.

With a biased final sample, you may not be able to generalise your findings to the original population that you sampled from, so your external validity is compromised.
What is the observer-expectancy effect?: The observer-expectancy effect occurs when researchers influence the results of their own study through interactions with participants.

Researchers’ own beliefs and expectations about the study results may unintentionally influence participants through demand characteristics.
What is the definition of observer bias?: Observer bias occurs when a researcher’s expectations, opinions, or prejudices influence what they perceive or record in a study. It usually affects studies when observers are aware of the research aims or hypotheses. This type of research bias is also called detection bias or ascertainment bias.
What’s the difference between demand characteristics and social desirability bias?: Demand characteristics are aspects of experiments that may give away the research objective to participants. Social desirability bias occurs when participants automatically try to respond in ways that make them seem likeable in a study, even if it means misrepresenting how they truly feel.

Participants may use demand characteristics to infer social norms or experimenter expectancies and act in socially desirable ways, so you should try to control for demand characteristics wherever possible.
What is the difference between response and nonresponse bias?: Response bias is a general term used to describe a number of different conditions or factors that cue respondents to provide inaccurate or false answers during surveys or interviews. These factors range from the interviewer’s perceived social position or appearance to the the phrasing of questions in surveys.

Nonresponse bias occurs when the people who complete a survey are different from those who did not, in ways that are relevant to the research topic. Nonresponse can happen either because people are not willing or not able to participate.
Why is bias in research a problem?: Bias affects the validity and reliability of your findings, leading to false conclusions and a misinterpretation of the truth. This can have serious implications in areas like medical research where new forms of treatment are being evaluated.
What are common types of selection bias?: Common types of selection bias are:

Sampling or ascertainment bias

Attrition bias

Volunteer or self-selection bias

Survivorship bias

Non-response bias

Undercoverage bias
Why is generalisability important in research?: Generalisability is important because it allows researchers to make inferences for a large group of people, i.e., the target population, by only studying a part of it (the sample).
What is sampling bias?: Sampling bias occurs when some members of a population are systematically more likely to be selected in a sample than others.
What causes the placebo effect?: Although there is no definite answer to what causes the placebo effect, researchers propose a number of explanations such as the power of suggestion, doctor-patient interaction, classical conditioning, etc.
What’s the difference between confirmation bias and recall bias?: Confirmation bias is the tendency to search, interpret, and recall information in a way that aligns with our pre-existing values, opinions, or beliefs. It refers to the ability to recollect information best when it amplifies what we already believe. Relatedly, we tend to forget information that contradicts our opinions.

Although selective recall is a component of confirmation bias, it should not be confused with recall bias.

On the other hand, recall bias refers to the differences in the ability between study participants to recall past events when self-reporting is used. This difference in accuracy or completeness of recollection is not related to beliefs or opinions. Rather, recall bias relates to other factors, such as the length of the recall period, age, and the characteristics of the disease under investigation.
How does a funnel plot measure publication bias?: A funnel plot shows the relation between a study’s effect size and its precision. It is a scatter plot of the treatment effects estimated from individual studies (horizontal axis) against sample size (vertical axis).

Asymmetry in the funnel plot, measured using regression analysis, is an indication of publication bias. In the absence of bias, results from small studies will scatter widely at the bottom of the graph, with the spread narrowing among larger studies.

The idea here is that small studies are more likely to remain unpublished if their results are nonsignificant or unfavourable, whereas larger studies get published regardless. This leads to asymmetry in the funnel plot.
What are common types of cognitive bias?: Cognitive bias is an umbrella term used to describe the different ways in which our beliefs and experiences impact our judgment and decision making. These preconceptions are ‘mental shortcuts’ that help us speed up how we process and make sense of new information.

However, this tendency may lead us to misunderstand events, facts, or other people. Cognitive bias can be a source of research bias.

Some common types of cognitive bias are:

Anchoring bias

Framing effect

Actor–observer bias

Availability heuristic

Confirmation bias

The halo effect

The Baader–Meinhof phenomenon
What is the bandwagon effect?: The bandwagon effect is a type of cognitive bias. It describes the tendency of people to adopt behaviours or opinions simply because others are doing so, regardless of their own beliefs.
What is the difference between belief bias and confirmation bias?: Belief bias and confirmation bias are both types of cognitive bias that impact our judgment and decision-making.

Confirmation bias relates to how we perceive and judge evidence. We tend to seek out and prefer information that supports our preexisting beliefs, ignoring any information that contradicts those beliefs.

Belief bias describes the tendency to judge an argument based on how plausible the conclusion seems to us, rather than how much evidence is provided to support it during the course of the argument.
What is an availability heuristic example in everyday life?: The availability heuristic can influence our perception of risk in everyday life. One common example occurs when we are considering buying insurance. The sharp increase in purchases of flood insurance in the aftermath of flood events illustrates this phenomenon.

Witnessing such events, knowing someone who was personally affected, or extensive media coverage can make us more aware of floods (or make floods more ‘available’ to us). This can change our risk perception, even though statistically there may not be a change in the probabilities of future flooding.
What is an example of heuristic in psychology?: Heuristics are mental shortcuts or rules of thumb that help people reduce the time and effort required to make a decision. An example of a heuristic in psychology is the availability heuristic (or availability bias). It involves relying on information that comes to mind quickly, (i.e., information that is available to us).

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What is the framing effect in economics?

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Frequently asked questions: Research bias

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