INFLUENCING RISK PREFERENCE IN DECISION-MAKING - THE EFFECTS OF FRAMING AND SALIENCE

Prospect theory predicts that people tend to prefer the sure option wh en choosing between two alternative courses of action framed in terms of gains and prefer the risky option when choosing between two alterna tives framed as losses. Related research investigated the impact of em phasizing the probability of the positive outcome of a risky option ve rsus emphasizing the probability of the negative outcome on preference , Most of these studies on the effects of ''outcome salience'' related their findings to prospect theory's framing effect. It will be argued that most of these studies inaccurately applied prospect theory to ex plain the obtained effects and that these might be better understood i n terms of salience, In four experiments we test the predictions that (1) choosing between two options in a gain problem will lead to decrea sed risk preference as compared to loss problems and (2) emphasizing t he probability of positive outcomes of a risky option leads to increas ed preference for this option compared to emphasizing the probability of negative outcomes. Results confirm the impact of both prospect fram ing and outcome salience and indicate that these effects should be und erstood in terms of distinct, independent processes. (C) 1995 Academic Press, Inc.