Don't Like the Picture, Change the Frame: The Effects of Framing and Cognitive Ability on Risky Choice

Posted: 13 Nov 2014 Last revised: 13 Sep 2016

See all articles by Michael Guillemette

Michael Guillemette

Texas Tech University - Department of Personal Financial Planning

Chris Browning

Texas Tech University

Patrick Payne

Western Carolina University - College of Business

Date Written: November 11, 2014

Abstract

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

Suggested Citation

Guillemette, Michael and Browning, Chris and Payne, Patrick, Don't Like the Picture, Change the Frame: The Effects of Framing and Cognitive Ability on Risky Choice (November 11, 2014). 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.. Available at SSRN: https://ssrn.com/abstract=2523197 or http://dx.doi.org/10.2139/ssrn.2523197

Michael Guillemette (Contact Author)

Texas Tech University - Department of Personal Financial Planning ( email )

1301 Akron Ave, HS-260
Box 41210
Lubbock, TX 79409-1210
United States

Chris Browning

Texas Tech University ( email )

2500 Broadway
Lubbock, TX 79409
United States

Patrick Payne

Western Carolina University - College of Business ( email )

United States

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