Contracts with Framing

Salant, Yuval; Siegel, Ron

doi:10.1257/mic.20160230

Cited by 15 publications

(5 citation statements)

References 32 publications

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“…Second, even if contrary to Kőszegi and Rabin clients would be willing to consider reference points that are not in line with their expectations, following Salant and Siegel (2018), the framing effect of the expert's suggested reference point may wear off if the client gets more time to make his decision, and by talking to family or friends realizes that the decision can also be considered from the perspective of other reference points. In this case, standard models of the expert-client relationship where the client is uninformed but still strategically interacts with experts may be more relevant.…”

Section: Discussionmentioning

confidence: 96%

Strategic framing to influence clients’ risky decisions

Jaegher

2019

Theory Decis

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This paper develops a model of persuasive demand inducement in the expert-client relationship. The expert frames the decision on whether or not to buy expert services faced by a client with prospect-theoretic preferences, by making the client see this decision from the perspective of a particular reference point. When inducing a client to buy risky curative services, the expert should set a high reference point, and frame all outcomes as losses. When instead inducing a client to buy safe preventive services, as long as the client's loss aversion is sufficiently high, the expert should set an intermediate reference point, framing high outcomes as gains and low outcomes as losses.

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Section: Discussionmentioning

confidence: 96%

Strategic framing to influence clients’ risky decisions

Jaegher

2019

Theory Decis

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“…Spiegler (2014) generalizes the analysis and applies this condition to study a firm's equilibrium strategy in other frame-dependent behavioral models. More recently, Salant and Siegel (2018) consider frames that can either increase a product's attractiveness or highlight a premium product temporarily, 7 and study the design of adverse-selection contract Hershey et al (1982).…”

Section: Literature Reviewmentioning

confidence: 99%

“…Different ways of framing the same information have an impact on the final consumer decisions (Hershey et al, 1982;Thaler, 1980;Tversky and Kahneman, 1979), implying firms should pay close attention to how the product information is presented in the first place. Indeed, firms can actively use framing to increase their profit (Piccione and Spiegler, 2012;Salant and Siegel, 2018). For an insurance firm, its PDS describes the terms of an insurance plan and reflects the framing of the related contingencies, and the design of the PDS is often up to the insurer.…”

Section: Introductionmentioning

confidence: 99%

Comparative Profitability of Product Disclosure Statements

Burkovskaya

2020

SSRN Journal

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In insurance industry, product disclosure statements (PDSs) consist of descriptions of uncertain contingencies by the insurance plans (e.g., "hospital coverage", "dental coverage", etc.) and are often very different. In this paper, we model PDSs as information partitions of the state space, which can influence how a consumer perceives the structure of her choice problem and hence her deductible choices. We study a model of an insurance company that aims to promote profit by designing the framing of its PDS. We compare the company's profits under two PDSs, one of which is coarser than the other. Our main results show that under simple conditions, the PDS consisting of finer partitions of the more expensive states is more profitable.

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“…6 Recently, Piccione and Spiegler (2012), Spiegler (2014), and Salant and Siegel (2018) intro-Finally, many economically important situations are one-time situations or have a rst period without precedents (in which case rst-period behaviour may be particularly important as in case of multiple equilibria, it may determine the equilibrium that will be played in the long run). As an example, think of competing rms designing a new product who have to adapt one of two distinct but equivalent standards.…”

Section: Introductionmentioning

confidence: 99%

The lottery player’s fallacy: Why labels predict strategic choices

Wolff¹

2021

Journal of Economic Behavior & Organization

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This paper examines games with non-neutral option labels (such as "A", "B", "A", "A") and nds surprisingly invariant behaviour across games. The behaviour closely resembles the choices people make when they have to bet on one of the options in individual lotteries. An option's 'representativeness' (lack of distinguishing features) and 'reachability' (physical centrality, salience, and valence) determine choice behaviour in both the lotteries and the highly strategic games. There is no evidence of people best-responding to others' betting(-like) behaviour. This is in line with the idea that once people decide that strategic reasoning would not take them any further, they pick an alternative as if they were betting on one of their 'current best-responses'. The ndings explain the well-documented seeker advantage in hide-and-seek games, as well as why participants often display behaviour that could be exploited by others. On top, they help understand why in national lotteries, people also tend to bet on identical subsets of the available numbers.

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Contracts with Framing

Cited by 15 publications

References 32 publications

Strategic framing to influence clients’ risky decisions

Strategic framing to influence clients’ risky decisions

Comparative Profitability of Product Disclosure Statements

The lottery player’s fallacy: Why labels predict strategic choices

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