Choices, values, and frames
Daniel Kahneman and Amos Tversky discuss the cognitive and psychophysical determinants of choice in risky and riskless contexts. The psychophysics of value produces risk aversion for gains and risk seeking for losses, and the psychophysics of chance produces overweighting of sure things and of improbable events relative to events of moderate probability. Decision problems can be framed in several ways that give rise to different preferences, contrary to the invariance criterion of rational choice. Mental accounting, the way people organise the outcomes of transactions, explains some consumer anomalies, and the acceptability of an option can depend on whether a negative outcome is seen as a cost or as an uncompensated loss.
Daniel Kahneman and Amos Tversky discuss the cognitive and psychophysical determinants of choice in risky and riskless contexts. The psychophysics of value produces risk aversion for gains and risk seeking for losses, and the psychophysics of chance produces overweighting of sure things and of improbable events relative to events of moderate probability. Decision problems can be framed in several ways that give rise to different preferences, contrary to the invariance criterion of rational choice. Mental accounting, the way people organise the outcomes of transactions, explains some consumer anomalies, and the acceptability of an option can depend on whether a negative outcome is seen as a cost or as an uncompensated loss.
Written from the abstract as shown on the Casualty Actuarial Society abstract page, read 2026-10-28.
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Kahneman, D., & Tversky, A. (1984). “Choices, values, and frames.” American Psychologist, 39(4), 341-350. doi:10.1037/0003-066X.39.4.341 https://doi.org/10.1037/0003-066X.39.4.341