A critique of prospect theory and framing with particular reference to consumer decisions

Abstract

Prospect theory is criticized in this article for being borrowed from psychology without appropriate acknowledgement, for requiring mathematical calculations that are beyond the average person, for not investigating information processing during prospect theory choices, and for lacking application to real‐world decisions—such as important product and service choices made by consumers. Further criticism is leveled at the prospect theory‐derived technique known as “framing,” which is based on one‐sided presentation of information and would be unethical in most consumer behavior situations.

To Dine, or Not to Dine on a Cruise Ship in the Time of the COVID-19 Pandemic: The Tripartite Approach towards an Understanding of Behavioral Intentions among Female Passengers

“…The value of the prospect theory in the decision-making process based on expected utility is grounded on the basis that it can offer an alternative to classical economic theory [42]. The prospect theory relies on the premise that individuals value losses and gains differently; hence, when a person is in an uncertain situation where the probability of different outcomes is largely unknown and risk perception is relatively high, her/his final decision between probabilistic alternatives is based on perceived gains [30].…”

“…The prospect theory relies on the premise that individuals value losses and gains differently; hence, when a person is in an uncertain situation where the probability of different outcomes is largely unknown and risk perception is relatively high, her/his final decision between probabilistic alternatives is based on perceived gains [30]. However, losses appear to be quite substantial compared to the rewards [43], and since losses carry about twice the load of the rewards, individuals are loss-averse when they choose between prospects [42]. Furthermore, the prospect theory is a useful tool in determining behavioral intentions, as it emphasizes the psychological determinants of risk perception [44].…”

Fuzzy-Trace Theory and Risky Decisions in The Setting of The Digital Economy

“…Vagueness to this series of word for word, allows decision makers to generate reversals of options. (Rossiter, 2019) describe the classical framing effect (Asian disease), which is that when quantitative information is available, decision makers initiate choices to be "more" or "less" than other options to distinguish them. When an option enters a result of zero (no one is saved), the essence of the option then becomes "multiple" with "nothing" or "there" with "none".…”

“…In the context of online shopping decision making is seen as often in a state of uncertainty, decision makers face the domains and frame problems described in behavioral decision theory, which reveals that consumers can become irrational in decision making (Zeng et al, 2021;Zhu et al, 2022). Prospect theory (Kahneman & Tversky, 2013;Rossiter, 2019;Zeng et al, 2021) and Fuzzy-Trace Theory (C J Brainerd & Reyna, 2019; Charles J Brainerd & Reyna, 2001 discuss how decision makers formulate domains and frame problems. This theory has been tested in a variety of contexts and its findings are strong in support of the framing effect (Levy et al, 2020;Wenger et al, 2021).…”

Hotel review framing and the “law of small numbers”

“…The experiment used a two framing (positive vs. negative) × 2 presentation format (abstract vs. concrete) × 2 number of reviews (small vs. large) between-subjects factorial design. This study employed single evaluation of a prospect by participants, instead of preference reversal in which two presentation conditions are offered, as it is not often that two opposite and competing examples would be offered side by side in an actual online setting (Rossiter, 2019). Framing refers to the presentation of identical rating summary statistics displayed from two perspectives.…”