Just the other day I found myself in the waiting room of an automotive dealership. While my car was being serviced, I flipped through a product brochure. One ad for an oil change boasted that it would clean out at least 90 percent of used oil. Another for new brakes guaranteed maximum performance for twelve months. No one was advertising oil changes that leave behind 10 percent sludge, or brakes that begin to fail after only a year.
That’s because advertisers know that people are sensitive to how options are framed. We appraise goods more highly when their positive attributes are emphasized over their negative attributes, even if the details describe essentially the same situation (e.g., 90 percent clean versus 10 percent dirty).
This is called attribute framing, and it’s just one example of many irrational biases that humans exhibit when making economic decisions. Other examples include loss aversion (the preference for avoiding losses over acquiring gains), the endowment effect (people ascribe more value to something once they own it), and the reflection effect (people shift their risk preferences when dealing with gains versus losses).
These irrational biases are common, they’re really hard to overcome, and they have pervasive impacts on human market behavior. For example, people are more likely to spend a sum of money when it is framed as a bonus than when it is framed as compensation for a previous loss, like a rebate, which has implications for population trends in spending versus saving. Framing also influences people’s medical decisions, such as their tendency to undertake preventative measures in personal health care. And it’s often leveraged by marketing agencies to improve sales.