Influencing Risk Preference in Decision Making: The Effects of Framing and Salience

Prospect theory predicts that people tend to prefer the sure option when choosing between two alternative courses of action framed in terms of gains and prefer the risky option when choosing between two alternatives framed as losses. Related research investigated the impact of emphasizing the probability of the positive outcome of a risky option versus 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 explain the obtained effects and that these might be better understood in terms of salience. In four experiments we test the predictions that (1) choosing between two options in a gain problem will lead to decreased risk preference as compared to loss problems and (2) emphasizing the probability of positive outcomes of a risky option leads to increased preference for this option compared to emphasizing the probability of negative outcomes. Results confirm the impact of both prospect framing and outcome salience and indicate that these effects should be understood in terms of distinct, independent processes.