Abstract:

The description invariance principle, which is one of the axioms of normative economic theory, requires that equivalent descriptions of a problem yield the same preference ordering. However, several studies have revealed that people often violate the invariance principle in real world decision-making. This action is known as preference-framing effects in decision-making. We reviewed new findings on the framing effect in the field of risky and intertemporal decision-making. We presented the framing effect research with a verbal as well as graphical frame. We also introduced compensatory models (e.g., prospect theory) and non-compensatory models (e.g., equate-to-differentiate model) as the psychological mechanism. This review encourages future researchers to extend the study of framing effects.

Key words: framing effect, risky decision-making, intertemporal decision-making, graph framing effect, equate-to-differentiate model, prospect theory