Ambiguity, precision, and choice: A fuzzy trace theory analysis of framing effects in decision-making under uncertainty.

Abstract

Framing effects are inconsistencies in preference across transformations in stimulus content. In this study, I present two experiments designed to test the descriptive power of two competing theories of cognitive aspects of framing effects in choice. Traditional explanations for framing effects, such as prospect theory, suggest that choice is a function of operations on numerical elements of risky stimuli. Cognition is presumed to be quantitative in nature, including diminishing returns for the values of outcomes and discounting of probabilities. In contrast, fuzzy trace theory, a relatively new conceptualization of cognition with very different assumptions than psychophysical approaches, suggests framing effects result from qualitative processing of decision components. Participants chose between certain and risky alternatives across a variety of reflection problems. Dependent variables in these experiments include choice, confidence in choice, a sensitive weighted measure called signed confidence, and response latency. Results of both experiments suggest failures of the psychophysical approach, and highlight successful predictions based on fuzzy trace theory. These predictions are based on four principles of the fuzzy trace theory intuitive approach to cognition: gist extraction, the hierarchy of gist, the fuzzy to verbatim continuum of memorial representations, and the fuzzy processing preference. The results tend to refute explanations of framing effects as being computationally and quantitatively driven and support explanations based on qualitative processing. Intuition, rather than human information processing, is an elegant description of decision making under uncertainty.