Framing effects

Cognitive biases often surprise us. One of the most common is the framing effect, which influences every decision-making process. It means our choices are strongly influenced by how an offer, product, or service is presented to us and, consequently, by how we perceive them and the feelings they evoke within us – that is, by the way the various options are 'framed' (just like a camera can frame an image from a thousand different angles).

Sometimes the framing effect is so strong it makes us interpret the exact same information in completely different ways. But how is that possible? It depends on how the positive or negative consequences of a choice are presented to us, and not just on the mental calculation we make of its utility – a calculation that is never based on neutral and purely objective factors. We must admit it: this challenges the assumption of the rationality of the ‘homo economicus’, which characterized classical economic studies.

Framing affects us when choosing investments, current accounts, or banks. The ways in which these 'products' and opportunities are presented to us can be more or less effective. Positive framing often persuades us more.

This is why trading platforms often show winning images that lead us to imagine that great profits are made there, and the branch manager of the local bank welcomes us in a nice, quiet room with relaxing colors. The presentation – the framing of the situation – stimulates positive feelings that influence our choices. In other words, because of the framing effect, clothes make the man!

To make better decisions, learn to recognize framing effects. Watch the video and the rest of the series on behavioral traps.