FRAMING EFFECTS IN THE EVALUATION OF MULTIPLE RISK REDUCTION

We studied how evaluation of changes in low-probability risks are affe cted by reference points and framing effects. Subjects considered hypo thetical situations with one or two low-probability risks. Different f rames were used to describe changes in risk levels. In the first exper iment, subjects chose between risk-reduction options that achieved the same overall risk reduction: large reduction of one risk vs. equal (s maller) reduction of two risks. When the risks were described as losse s relative to the no-risk ideal, more subjects were indifferent betwee n the options than when the same options were described as gains relat ive to the status quo. In the latter case subjects preferred equal red uction of both risks, unless one risk could be reduced to zero. In a r elated experiment, subjects were less willing to pay any price for a c ommodity that carried small increases in two risks than for a commodit y carrying a comparable large increase in one risk. In other experimen ts, subjects evaluated single changes in risks rather than comparing o r evaluating pairs of changes. Subjects again placed particularly high value on reducing any risks to zero, and they were even more inclined to do so when some other risk would also be reduced to zero. In a fin al experiment, elimination of risk was found to be less highly valued if its source was not fully eliminated, and a status-quo effect was fo und. The findings are interpreted in terms of reference theories of ch oice.