It has been argued that behavior differs between transparent and nontransparent representations of a decision. However, the notion of a ‘transparent representation’ has not been precisely defined. We address this gap by providing formal definitions of ‘transparent frames’ for risk and time, establishing their uniqueness, presenting an approach to construct such frames, and comparing these framesto the ‘standard’ presentation format. Our typology of frames provides a logic for predicting systematic shifts in risk and time preferences as well as changes in the violation rates of rational choice theory. We conduct an experiment for choice under risk to investigate the framing effect between transparent and ‘standard’ frames and find such framing to be an important source of non-random variation in observed risk preferences. We also extend our approach to choice under uncertainty and derive the novel prediction that ambiguity aversion is frame dependent, a result supported by recent experimental evidence.
Leland, J., Schneider, M., & Wilcox, N. (2017). Minimal frames and transparent frames for risk, time, and uncertainty. ESI Working Paper 17-15. Retrieved from http://digitalcommons.chapman.edu/esi_working_papers/227/