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The framing effect, which is one of the cognitive biases, can play a major role in changing preferences and the decision-making process. However, whether the gain and loss frames modulate the evaluation of feedback during decision-making is still unclear. In this study, we used event-related potentials (ERPs) with a Balloon Analogue Risk Task (BART) paradigm to examine the effects of a gain and loss frame on the evaluation of feedback during the decision-making process of the brain. Behavioral data showed an increased uncertainty-aversion, especially after receiving negative feedback (balloon explosion) during the completion of the BART in the gain frame relative to the loss frame. The ERP data demonstrated a more negative feedback-related negativity (FRN) after receiving negative feedback in the gain frame relative to the loss frame. Additionally, the FRN amplitude elicited by the negative feedback correlated with the future decision-making behavior in both the gain and loss frames. These findings demonstrated that, in comparison to the loss frame, the gain frame increased behavior and brain sensitivity to the failure of decision-making under uncertainty.

Framing influences choice. However, little is known about the underlying mechanisms behind framing effects. We study gain-loss framing in binary modified dictator games. Subjects choose the selfish option more often in the loss frame compared to the gain frame. Recording visual fixations with eye-tracking, we find that dictators focus more on their own outcomes when facing losses. This suggests that losses to the own outcome are weighted more than losses to another player.

We analyze the influence of frustration and anger on committing a norm violation in a laboratory experiment. Subjects complete a real-effort task where compensation is framed as a gain or a loss and subsequently report experienced levels of different emotions. Finally, subjects may increase their own income by taking away money designated for donation to charity. While both males and females experience higher levels of negative emotions in the loss frame than in the gain frame, we find that only men are more likely to take away money in the loss scenario.

Urban traffic management aims to influence navigational decisions of drivers to avoid congestion and provides travel information. To this effect, even small-scale differences between route options can be presented as gains or losses (valence framing), e.g. ‘Route A is 1 min faster than Route B.’ vs. ‘Route B is 1 min slower than Route A.’ or ‘Route A has 1 min waiting time at traffic lights.’ vs. ‘Route B has no waiting time.’ To analyze if valence framing has an impact on route choices, a short online survey was conducted. Four route choice scenarios were presented, consisting of a 500 m main route with red traffic light and an alternative without traffic lights but varying travel time and distance. A total 458 drivers participated and were randomly assigned to one of the five experimental groups: control, gain or loss frame of travel time, gain or loss frame of waiting at a red traffic light. Results showed for the framing of travel time that gain framed routes were often approached more than loss framed routes were avoided. The framing of the waiting time had no effect. Traffic planners and policy-makers as well as navigation system manufacturers could make use of the findings but more research is needed on the design of travel information.

Mobile communication technologies are ubiquitous and span a wide range of applications. The present study assessed the effects of message framing on the public acceptance of branchless banking applications using the unified theory of acceptance and utilization of technology (UTAUT). Adult holders of an active bank account were randomly assigned into three message framing conditions (gain frame, loss frame, and control condition), and completed structured anonymous questionnaires on technology acceptance variables derived from the UTAUT. Analysis of variance (ANOVA) showed that message framing manipulations did not influence directly self-reported scores on technology acceptance variables. However, linear regression analyses showed that message framing differentiated the interrelationships between usage intentions and related UTAUT variables between conditions. Moderated regression analysis further showed that gender interacted with performance expectancy in predicting usage intentions in the control group condition. Message framing manipulations influence the way intentions to use technology relate to technology acceptance beliefs. This effect should be further examined in the context of technology acceptance models in e-commerce applications, and more especially in the branchless banking domain. Efforts to promote branchless banking applications would benefit from assessments of potential users’ technology acceptance beliefs and intentions.

Framing influences choice. However, little is known about the underlying mechanisms behind framing effects. We study gain-loss framing in binary modified dictator games. Subjects choose the selfish option more often in the loss frame compared to the gain frame. Recording visual fixations with eye-tracking, we find that dictators focus more on their own outcomes when facing losses. This suggests that losses to the own outcome are weighted more than losses to another player.

We are prone to ethical errors owing to bounded ethicality stemming from bounded awareness. It is possible that unethical decision potentially leads to a crucial accident. It was hypothesized that decision makers engage more frequently in unethical behavior such as violation of rules or regulations to be kept if the decision options are presented in a loss frame than if they are presented in a gain frame especially when System1 is mainly used for decision making. As a basic study on safety management, in particular, the accidents which stem from the violation behavior due to lack in ethicality, it was explored whether we are more vulnerable to unethical behavior in the loss frame of decision making than in the gain frame. Consequently, in the range of this study, it was shown that we are not necessarily suffer more from unethical behavior in the loss frame than in the gain frame when we make decision relying on heuristic (System1).

In an online experiment on Amazon’s Mechanical Turk, we analyze the effect of framing information about aid effectiveness on donation behavior. We find that combing a loss frame with an identified victim narrative to convey information about a development project’s impact raises larger donations than a gain-framed narrative or a factual text. Also, donation calls that only state the development problem the project is addressing result in larger donations than donation calls providing additional information on the project’s impact. Analyzing the mechanisms behind these results, the data shows that, regardless of the framing, providing information about a project’s impact increases individuals’ knowledge and perception of effectiveness. But, while higher perceived effectiveness results in larger donations, increased knowledge lowers them - resulting in a zero net effect of additional information on donations. It seems that only appealing to individuals’ emotions through an identified victim narrative significantly increases donations.

For decades corporations have been promoting their responsible behaviors toward the environment. This study looks at three ways organizations have framed their corporate environmental responsibility over the past 30 years. Specifically, the study finds that organizations focus on the way their environmental behaviors contribute to solutions (gain frame) rather than prevent environmental problems (loss frame). They focus on solving problems for the current generation rather than future generations, and they promote their actions (doing more) rather than promote their conservation (taking less from the earth). However, some differences in framing and use of environmental topic emerge over time.

Prospect theory states that an individual in a loss situation is more likely to make a risky financial decision than when they are in a gain frame. Some researchers observe that Asians tend to have a more positive attitude toward risk in financial decisions than Westerners. The first of two studies tests these two phenomena. The study finds Singaporeans and Chinese to be less risk averse than Dutch and New Zealand people over both a gain and a loss frame when making a personal financial decision. A second study extends this finding to individuals in a business relationship switching suppliers, and finds that when switching is framed as a risky decision the same pattern of behavior occurs. New Zealand and American consumers are more risk averse than those from Japan and Singapore, who are more likely to change suppliers under both a gain and a loss frame.

Two studies explored individual differences in perspective taking and perspective as moderators of risky choice framing effects. Study 1 (N = 230) showed perspective taking moderates framing among women. Study 2 (N = 256) experimentally manipulated two perspectives: a focus on feelings was expected to increase the framing effect; a focus on thoughts was expected to decrease it. Given men’s lower emotional reactivity, we expected the affective focus would magnify framing effects among men, as they appear less likely to spontaneously consider how they would feel. This was supported in follow-up analyses of the five-way interaction of frame, gender, feel, cognitive and affective perspective taking. Findings suggest that larger framing effects seen for women in previous research may be due to differences in whether one spontaneously considers how one would feel, that is, to individual differences in affective perspective taking.

A common approach to set transfer prices is via intra-firm negotiation. However, Luft and Libby [Luft, J. L., & Libby, R. (1997). Profit comparisons, market prices and managers’ judgments about negotiated transfer prices. The Accounting Review , 72 (2), 217–229] found that because of the existence of self-serving biases, negotiating managers have different expectations regarding what constitutes a ‘fair’ transfer price, leading to a less efficient negotiation process. In this study, we examine two factors that are expected to affect managers’ transfer price negotiation judgments, namely, framing as a gain or as a loss and the negotiation partner’s objective (whether the partner’s objective involves high or low concern-for-others). We propose that these two factors affect managers’ perceptions of the negotiation context, and thus the way they interpret the economic and social consequences of accounting information. Our results show that a loss frame (compared to a gain frame) exacerbates managers’ self-serving biases and increases the ‘transfer price expectation gap’ between buyers and sellers. Further, in our experiment where market price is higher than equal-profit price, we find that managers’ transfer price expectations are lower (and deviate more from the prevailing market price) when they are negotiating with a partner with high concern-for-others than with a partner with low concern-for-others. We discuss the broader implications of these results for the design of management accounting systems.

Item response theory (IRT) methodology allowed an in-depth examination of several issues that would be difficult to explore using traditional methodology. IRT models were estimated for 4 risky-choice items, answered by students under either a gain or loss frame. Results supported the typical framing finding of risk-aversion for gains and risk-seeking for losses but also suggested that a latent construct we label preference for risk was influential in predicting risky choice. Also, the Asian Disease item, most often used in framing research, was found to have anomalous statistical properties when compared to other framing items. Copyright 1998 Academic Press.

Recent research suggests that loss framed contracts are an effective instrument for principals to maximize the effort of their agents. Framing effects arise from defining thresholds that vary the salience of losses and gains while preserving payoff equivalence of the underlying contract. While under Prospect Theory a loss frame should lead to more effort we show that contract thresholds also exert a suggestive effect on performance that can trump the impact of loss aversion. Loss framing therefore carries a risk. As agents focus their effort choice on the expressed thresholds, poorly selected thresholds reduce effort and the principal might prefer offering a contract that does not impose a threshold at all. On the other hand, imposing demanding thresholds may push effort beyond levels predicted by Prospect Theory.

Recent evidence from the field (Hossain and List, 2009) suggests that contracts framed in terms of a loss (a deduction is taken for failing to meet a threshold) lead to greater effort than contracts framed in terms of a gain (a bonus is given for meeting a threshold). We investigate two explanations for this framing effect in a laboratory setting. First, we find that the loss frame communicates the expectation that achieving the bonus is the default and that our subjects comply with this expectation. Second, we find evidence for an endowment effect, even though the bonus is just a monetary payment that subjects do not even have in their possession.

We explore how two key aspects of accounting information affect trusting behavior between unknown parties in a bilateral negotiation. The two aspects include the fineness/coarseness of cost information that can be utilized during the negotiation and the profit/loss frame induced by accounting information going into the negotiation. Based on several streams of literature related to trust, we develop a theoretical model of the antecedents and consequences of trusting behavior. Specifically, we provide a model linking accounting contextual variables to perceived risk, trusting behavior, and negotiation outcomes. We conducted an experiment using 148 participants (74 negotiating pairs) to test our hypothesized model. We measured trusting behavior as the negotiator's choice to share or not share private cost information with their negotiating partner. The consequences of trusting behavior include the economic outcome of the negotiation as well as the negotiator's perceived satisfaction with the negotiation process and with the other negotiator. Our main findings demonstrate that accounting information fineness is negatively related to trusting behavior and a loss frame is positively related to trusting behavior. Furthermore, we find significant and positive links between trusting behavior and both economic outcomes and satisfaction with the negotiation process. Overall, our study contributes to the literature by establishing a more comprehensive model of the relationships between aspects of accounting information, risk perceptions, trusting behavior, and negotiation outcomes.