Don't Like the Picture, Change the Frame: The Effects of Framing and Cognitive Ability on Risky Choice
Guillemette, M. A., Browning, C. M. and Payne, P. (2015). Don’t Like the Picture? Change the frame: The impact of cognitive ability and framing on risky choice. Applied Economics Letters, 22(18), 1515-1518.
Posted: 13 Nov 2014 Last revised: 13 Sep 2016
Date Written: November 11, 2014
This paper identifies the effect a perceived up-front cost has on subsequent risky choice of older Americans. When respondents are faced with outcome alternatives framed in an up-front cost and no up-front cost domain, we observe variation in the respondents’ required outcomes based on the order in which the two domains are presented. We provide evidence that among respondents with lower cognitive ability, losses need not be realized to affect subsequent risky choice, and that an up-front cost lowers the willingness to take risk in a future period. Implications for annuitization demand are discussed.
Keywords: framing, risky choice, cognitive ability, risk perception, up-front cost
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