The Frame Effect Revisited: Is Trust able to Transform People from Risk Averse to Risk Taker?

Title

The Frame Effect Revisited: Is Trust able to Transform People from Risk Averse to Risk Taker?

Author

Giovanna GALLI, Marcello TEDESCHI, Maria Cristiana MARTINI

Classification JEL

M31.

Abstract

When people have to choose between two equivalent options, they prefer the certain one in gain domain and probabilistic one in loss domain: this is the main statement of Tversky and Kahneman (1981) Frame effect. It has been explained through rational choice theory, according to which people tend to underestimate large probabilities and therefore to under-evaluate the expected value of a probabilistic choice (Tversky, Kahneman (1981, 1986). Nevertheless, different literature contributions assert trust is able to reduce risk perception and therefore can drive people towards decisions they wouldn’t have taken with high risk perception (Galli, Nardin, 1997; Tedeschi, Galli, Martini, 2017). If this assertion is generally valid, trust should have impact also on frame effect, at least reducing risk aversion in gain domain. Three preliminary tests have been conducted to measure the impact of trust on risk perception in binary choices. Frame effect has been reproduced in three different scenarios, people having to choose between two alternatives with the same expected value, both in gain and loss domain. Each scenario was first tested in its original formulation and then with the introduction of a more detailed description of the context or alternatives, introducing items able to represent cognitive and emotional dimensions of trust. Results confirm risk aversion reduction in gain domain with a ‘magnitudo’ of the effect depending on the trust construct adopted to enrich alternatives.

Keywords

Frame Effect, Brand Trust, Interpersonal Trust.

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Please cite this article as: etimm (2018) The Frame Effect Revisited: Is Trust able to Transform People from Risk Averse to Risk Taker?. Journal of Emerging Trends in Marketing and Management. http://www.etimm.ase.ro/?p=506