Choice, Value, Frames

Topics: Utility, Risk, Decision theory Pages: 1 (310 words) Published: January 27, 2013
People make decision all the time to choose the best option in considering the utility and value that can get the most. Choice is like a gamble game that can generate several outcomes with different probability. It derives many of its hypotheses analysis of responses to money and to probability. However, people normally will not think the outcome in terms of total wealth, but rather than gain and losses and neutral outcomes. Many people prefer to choose the sure thing over the gamble even the gamble has higher probability on gain which is called risk averse. People prefer to choose gamble and refuse the sure thing while gamble in favor which is called risk seeking. The choices can be framed or described in different ways that can influence the decision. Invariance criterion of rational choice requires the changes in the description of outcomes should not alter the preference order. It is the evaluation of options in terms of their actuarial rather than consequences. The failure of invariance has two factors, the framing of probabilities and the nonlinearity of decision weight. Formulation effects explains a change of word in the description of outcomes has easily to shift the preference from risk aversion to risk seeking, which is common in marketplace and in the political arena. We make choices between multiattribute options like the acceptability of a transaction or a trade. The overall value of an option is to balance of its advantages of its disadvantage in relation to the reference state. A mental accounts set up to evaluate gain and losses in relative rather than in absolute terms. Regret, frustration and self-satisfaction can also be affected by framing (Kahneman & Tversky, 1982). Experience value and decision value is usually used of sense. The framing effects and violations of invariance have complicated the decision values and experience values and no counterpart.
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