Article Notes for presentation!

Dissecting the Risky-choice framing effect: Numeracy as an individual-difference factor in weighting risky and riskless options!

Peters and Levin (2008)

Introduction

This journal using the variants of the Asian Disease Problem tried to dissect the risky-choice framing effect. This demonstrated the way in which choices in decision making are advertised, based on whether they are positively or negatively framed. Whereby the participants had to provide preference ratings for the full decision problem and provide attractiveness ratings for each of the component parts i.e the sure-thing option and the risky option.

Numeracy moderates framing effects:

Numeracy refers to the ability to understand and use mathematical and probabilistic concepts. In the US approximately half the population has difficultly with simple numeric tasks. Therefore it is not surprising that greater ability with numbers leads to more comprehension of numeric information in important decisions. Statistics showed (national adult literacy survey) that half the general U.S population has difficultly with simple numeric tasks. Although these individuals may not perceive themselves as ‘at risk’ in their lives due to limited skills, research suggests that that having inadequate numeric skills is associated with lower comprehension and use of numeric information in health and financial domains. Therefore it is not surprising that greater ability with numbers leads to more comprehension of numeric information in important decisions. This shows that Numeracy relates in somewhat less intuitive ways to a variety of cognitive and affective biases.

Peters et al (2006)

Numeracy’s effects on framing of a single attribute by presenting participants with the exam scores of 5 psychology students and asking them to rate the performance of each student on a 7- point scale from -3 (very poor\0, to +3 (very good). The framing of the exam scores were manipulated as either percent correct or percent incorrect. 74% correct vs. 26% Incorrect.

From this it was found that high numerate participants being more likely to retrieve and use appropriate numerical principles. And transform numbers in one frame to another. The highly numerate appeared to integrate more sources of information then the less numerate. Alternatively, in prior studies of numeracy, highly numerate individuals have demonstrated deeper processing of numeric information by showing smaller framing effects.

Vs Garcia (2006)

Garcia examined the risky-choice paradigm, and found no effect of numeracy’s influence on attribute framing. Therefore because of this it is curious that numeracy did not influence risky-choice framing effects in s similar manner with greater effects of the provided frame on the less numerate.

Example

The Sure thing option offers a fixed (riskless) outcome. In the Positive framing condition it is ‘save 200 (out of 600) lives’ whereas in the Negative condition it is ‘400 will die’. The Risky option offers a ‘one-third chance that no one will die and a two-thirds chance that all will die’ in the Negative condition.

Experiment

During the task the participants were assigned to a positive or negative frame. Where they have to provide preference ratings for the full decision problem, and also to provide attractiveness ratings for each of the component part i.e the sure-thing option and the risky-choice option.

They were then asked to fill out a demographic from which aimed to discover whether they were highly or less numerate.

Results

It was found that because the less numerate are less able to translate, therefore their results will be less reliable. Although the less numerate showed a larger framing effect. Alternatively the highly numerate understood the choices and numbers more effectively, therefore made more accurate and complex decisions.

Discussion

Overall findings showed that the risky choices were made by participants choosing the negatively framed versions. During this article it looked at participants with differences in their numerate levels. Some were highly numerate and some had low numeracy. The results showed that the less numerate had a large effect of frame above and beyond their options, whereas the high numerate were almost completely accounted for by their attractiveness ratings.

Therefore ultimately this shows that people who have greater numerate skills are able to integrate complex numerical information in the construction of their preferences as they have a greater working-memory capacity. Therefore there are individual factors in weighting risky and riskless options.