Introduction to Framing Effect
Framing effect is also known as cognitive bias and under this, different people reacts as per their choices and this totally depend upon the presentation. Frames could be negative as well as positive and while presenting a positive frame, people tends to avoid risks but while presenting negative frames, people seeks risks. For instance, loss and gain, both could be explained in different frames which could impact decision making process of an organization. Decision making is an essential instrument for an organization because organizational success and failure depends upon the decisions taken by the management and decisions are taken by considering certain factors such as efficiency of the employees, capital requirements for a particular project, other resource requirements, etc. Decision making is referred to as the cognitive process under which appropriate belief or course of action is being selected by reviewing all possibilities. Decision maker has a huge responsibility to take an appropriate decision because beliefs of a decision maker affect organizational decisions (Tu, Kao & Tu, 2013).
For example, Amazon Inc. is a largest online shopping corporation in the world and the CEO of the company i.e. Jeff Bezos never discloses the turnover, profitability and other aspects of a particular department. Instead, he used to disclose is Gross Merchandising Value (GMV) of the whole business. Amazon Inc. is a large corporation and their product and service offering is also huge through which the organization is being able to fulfil its customer’s needs from various segments. Shareholders and stakeholders invest by reviewing all aspects of the organization and if merchandising value will be disclosed on the basis of department, and then shareholders may change their decision of investing in the department where promotional cost and other costs are high, still returns are less. This will affect organizational growth, success and the decision making procedure of shareholders. In current scenario, shareholders and stakeholders invest in Amazon Inc. not in single department, hence, they discloses gross merchandising value of the whole business rather than disclosing single department’s revenues, profitability, etc.
Framing effect has a great impact over decision making procedure because human performance is subject to a research based on several perspectives such as psychological, cognitive and normative. Psychological perspective examines individual decisions based on set of needs, preferences and their values. While cognitive perspective of decision making defines that it is a continuous process integrated in the interaction with the environment and the last perspective of decision making is normative analysis the decisions of individuals based on the logic of decision making, invariant choices and communicative rationality (Schmidt, Langner, Hennigs, Wiedmann, Karampournioti & Lischka, 2017).
Theories Related to Framing Effect
Articles have been selected for determining the impact of framing effect over marketing and organizational behaviour. Negative framing could generate negative outcomes for the organization while sometimes; it also helps the organization to learn better from a failure and rather from success. The first article critically evaluate different perceptions related with the framing effect in the organizational context while the other article includes theories and concepts related to the framing effect through which organization could be able to adopt appropriate measures so that negative scenarios could be avoided (McKechnie, Devlin, Ennew, & Smith, 2012).
The article focus over the positive effects of framing effect and numerous ways will also be identified which might get exploited. It has been observed that framing effect only have negative effects such as cognitive biases. Since these effects direct the judgements in an irrational manner, Stazi (2015) have researched about the positive sides of framing effect in marketing context. There is no doubt that framing effect is a theory which describes that the information could be manipulated in numerous manners in order to influence individual’s decision making and judgements. Presentation of information has a great impact over an individual’s or over group’s decision making process and they could easily be influenced through the presented figures, data and images. In relation to the marketing concept, organization uses this technique in order to influence their target audience towards their products and services. This convinces the individuals to change their decision in relation with choosing one brand over other (Ayadi & Lapeyre, 2016).
The whole study will showcases over the organizational marketing practices under which they use messages, images and other statements for convincing the target audiences for purchasing a product. Apart from this, author has also discussed the types of framing effect which are risky-choice frame, attributive frame and goal frame. Companies use one of them or sometimes, more than one as per the requirements in order to promote their products and services in the market (Amatulli, Peluso, De Angelis, Bagozzi, Soscia & Guido, 2015).
Organization uses sundry theories in order to construct persuasive messages for attracting target audience. From those theories, frameworks and concepts, cognitive biases are the most relevant methods because its leads to efficient results as compared to other theories and frameworks. Apart from the types of frameworks, this article also includes numerous configurations of cognitive biases and their effect over fields of advertisement and marketing in the organizational context. Prospect theory and expected theory are two most relevant models which will be discussed in this paper to discuss behavioural economics decisions and effectiveness of the marketing techniques used for influencing buyer’s purchasing decisions. With the help of sundry examples and experiments, these two theories will be evaluated. Framing is an essential aspect in terms of influencing buyers towards organizational products and this is the reason why promotional and advertisement techniques have acquired a big part in the organizational context (Yeung, 2014). With the help of effective marketing messages, organization could promote their products and services along with their specifications, unique features, usage, etc. This helps the organization to increase demand of their products in the target market along with uplifting their revenues and profitability. Author has discussed about the perception of marketer in relevance with the framing effect in marketing without taking customer’s perception into consideration (Nyström & Mustaquim, 2015).
Positive and Negative Aspects of Framing Effect
Framing phenomenon includes in the findings which describes the behavioural pattern of people i.e. in scenarios of gains, people take risk-averse while they take risk-seeking in losses scenarios. Generally, it has been observed that framing effect has been seen as a consequence to reference dependency which relates to the common feature of human information processing. Framing effect is related to the psychological concept and it is practiced in every field for various objectives. Organizations uses this approach to approach to its target audience, political parties uses this approach for convincing the voters and so on. Effect of framing a marketing message could be noticed in every aspect such as it will influence consumer’s buying decisions; work performance of organization will also be affected. Organizations apply this method with the view to uplift their sales through increasing the demand of their products and services by showcasing the crucial and effective features of their products but the effect of that particular marketing message over target audience could only be analysed by taking feedback from them (Guo, Trueblood & Diederich, 2017). Positive and negative aspects of the framing effect is totally depends upon how the phrase has been framed. For example, Amazon Inc. never discloses merchandising value for individual department rather they do is disclosure of GMV (gross merchandising value) of the whole company. This could originate either positive or negative outcomes for the organization because from the perceptive of organization, it is done to attract the investors towards the company but not towards one department. This is done so that every department of the company could grow and prosper equally and if individual merchandising value will be disclosed then the shareholders will start evaluating the most beneficial department of the company in terms of returns. This will affect organizational performance because the department which is performing well with low cost will get higher investments than the department whose returns are comparatively less with other departments and that too with high costs (Freling, Vincent & Henard, 2014).
Framing effect has been proven as the strongest prejudices in relation with decision making. Susceptibility to framing effect increases with age and difference in age factors are also considered as the vital elements for financial decisions and health care. In this paper, two important models have been discussed for analysing the various aspects of framing effects. Expected utility theory is one of them and this helps to identify the economic behaviour which refers to the people’s, preferences and choices. In this theory, marketer makes choice on the basis of risky and uncertain and this is done by comparing the expected utility values of both the scenarios and both these are compared with their values in correlation with their respective probabilities. While the other theory is prospect theory is composed with two phases in relation with choice process and these two phases are subsequent phase of evaluation and an early editing phase.
Marketing Practices Using Framing Effect
The main issues which will be discussed in this article are cognitive process and its biases along with this, their contributions to future research will also be discussed. In early times, cognitive process was divided into two groups i.e. reason and intuition. Now these two groups are labelled as dual process theories in modern times. Dual process theory has various variants and one of them is states distinction between cognitive operations slow and rule-governed and cognitive operations quick and associative. Along with this, psychologists are working on a research from many years for determining the two modes of thinking and they have also proposed various labels for them. In this manner, these two modes are labelled as “Thinking fast and Thinking slow” for better understanding about the two major modes of thinking and various examples have also been discussed to make a clear and better understanding regarding this. For example, a woman is screaming, initially people will start analysing her expressions and automatically experience ‘seeing’ and ‘intuitive thinking’. At the moment when people will realise that she is screaming very loudly, they will recognise that the woman is angry (Hurlstone, Lewandowsky, Newell & Sewell, 2014). While recognising woman’s reaction, some people will also start predicting that she is screaming because she do not want to use bad words and she is taking out her frustration. Further, people will also experience about her spontaneous and intuitive way. People will not try to evaluate her mood and they will not take further actions to predict woman’s action which she could take in the heat of the movement. Apart from this, people will also not take much efforts to gather information about woman’s behaviour and will not try to find out the reasons that why she is angry, etc. This is an example of fast thinking (Heilman & Miclea, 2016).
On the other hand, if people will find themselves in a problematic situation of finding the multiplication of 17*24, they will easily identify this as a multiplication problem and they will be able to analyse various ways of solving this type of situation and the foremost solution they are aware that they could be able to solve this with the help of a pencil and paper or with the help of calculator. Apart from this, they will also find the solution of this situation even without the use of pencil and paper because they have vague knowledge about the possible outcomes. They will be able to recognise that there could be various solutions but finding the exact solution will waste their time as there are huge possibilities. Due to no clues about exact solution, people may not engage in this process (Gerlach & Jaeger, 2016). Thus, they will adopt slow thinking process under which they will adopt sequential method which was taught to them during their school days. This is because people find burden in holding much information in their memories because they needed to be updated regarding their present tasks and what they will do in future. The thought process is bit difficult and it not only affects people’s mind-sets but it also affects their other body parts such as blood pressure rose, muscles tensed up along with the increase in heart rate (Mouron, Urdinez & Onuki, 2016).
Thus, example of angry screaming woman describes the operations of fast thinking as people find various aspects about her without putting many efforts. On the other side, while multiplication, people needs to put mental efforts. Both of these thinking processes interacts with each other and they are not separated. Thinking process one is subsequent for the next thinking process. For example, as per fast -thinking process, people will not be able to divert their mind-sets, till the time, they will not find the exact reason behind that or they totally focused elsewhere (Faralla, Novarese & Ardizzone, 2017).
Effect of framing can be determined when the two options i.e. positive and negative appeals systematically various choices. It has been observed that when individuals are asked to make a choice amongst the several options, they start evaluating the solutions for identical problems in terms of positive (gains) versus negative (losses) because both of them are contradictory to each other. In terms of determining practical insight of the article, author has used the most common example of framing effect i.e. Asian disease problem. Under this problem, marketers were required to choose amongst the risky option or sure option to save life or reduce the chances of deaths from that unusual disease. Under this situation, saving life is the positive frame while reducing the chances for death relates to the negative frame (Farrow, Grolleau & Ibanez, 2017).
In relation to this, scientists from United States prepare an outbreak for that unusual disease under which 600 people were expected to be killed. Majorly two alternatives have been proposed by the scientists in relation with the unusual disease. Estimations provided by scientists are as follows:
Positive Frame: Program A and Program B denotes to the positive frames under which probability for saving life are more in relation with the Program C (negative frame). If Program A will be adopted, then exactly 200 people will be saved while in Program B, 1 in 3 probability of saving all 600 people. Apart from this, Program B has another objective that 2 in 3 probability under which no one will be saved.
Negative Frame: Under adaptation of Program C, exactly 400 people will die while in adaptation of Program D, 1 in 3 probabilities that all will be saved and 2 in 3 probabilities are that all people will die.
According to author, positive farmed problems leads to sure responses and negative framed problems leads to risky responses. Research originated outcomes under which most of the people prefers to go with Program A and Program D. Whereas Program A is equal to Program C and Program B is equal to Program D. This is the impact of framing effect and in this scenario, Program A and C has been selected by people due to their positive responses while Program B and D are linked with negative responses. Apart from this, research also proves that in these types of situations, where no sure response was available, tendency of taking risk of people increases. There are numerous theories have bene planned to explain framing effect. Majority of them have been classified as cognitive, formal and motivational theories. Amongst them, well-known formal cognitive theory is prospect theory and as per this theory, people seek for sure responses. They do not seek for risky responses whose value is equal then the sure responses, while opposing opt true for perceived losses. For evaluating cognitive measures engaged in weighting gains and losses, cognitive theories have been designed (Stazi, 2015).
As per author’s perception, frame effect could be eliminated when individual appropriately examined every option for making a decision. Careful examination of all available options would be extremely tough in relation with cognitive resources. With regards to this, marketers are required to adopt appropriate advertisement and promotional strategies which could showcase positive image of the new product as well as for the organization. There are various limitations to this strategy such as if appropriate details will not be showcased through advertisement, organization will not be able to retain its potential customers. Marketer needs to perform this strategy in careful manner and what features, specifications and usage are shown in the advertisement should be matched with the real scenarios. Apart from this, there are various other limitations exists in relation with the framing effect and this could affect organizational performance and the position acquired in the market (Kühberger, 2009).
For example: As discussed earlier that Amazon Inc. discloses GMV rather disclosing merchandising value for individual department, thus, this leads the investors to think many times before investing in the company. The major factor which influences investors to invest in an organization is transparency, integrity, growth rate and profitability. In Amazon’s scenario, due to lack of transparency, organization may lose investors and this could lead the organization towards a negative phase. Thus, from the perspective of organization, framing of GMV is done to enhance organizational growth and to ensure success while from the perspective of investors, this is a negative point and framing of GMV from the organization could originate negative outcomes for the organization (Levin, Schneider & Gaeth, 1998).
Apart from this, framing effect also affects decision making of the consumers as well as of the investors. For examples, Amazon Inc. is dealing in various types of goods such as consumer durable, daily necessity goods, consumer electronics, apparels, etc. But, majorly it has been observe that company only promotes its consumer electronics goods and its related offers. This frame leads doubt in the mind-sets of target audience about the quality of its other departmental goods. For this reason, consumer prefers other online shopping websites for purchasing apparels and other necessary goods. Without spreading awareness amongst the public about their apparels department, setting up a positive image amongst them is bit difficult task. Due to framing effect, decision making of consumers as well as investors affects, thus, it is necessary to analyse the marketing conditions and the perceptions of the crucial stakeholders so that the negative effect of framing could be decreased (Hwang & Masud, 2012).
Primary objective of article is to evaluate problems occurred due to unique choices and perceptions of people. Framing effect is consequence of reference dependency and it is also known as basic feature of human information processing. Reference dependency, and the two features discussed in Prospect Theory are majorly responsible for the decisions taken by people and it also helps to predict those decisions. These two features are loss aversion and diminishing sensitivity. Under this article author has also discussed about the influence of framing manipulation type, regulatory focus and interaction between framing. Framing effect is the outcome of gain and loss and people take decisions by considering these two attributes (Zsambok & Klein, 2014).
For example: If a bet is offered to a person under which condition is if he wins, he will get $50,000 but if he loose, he needs to pay $30,000. Acceptance and non-acceptance of this bet is known as framing effect. In this scenario, most of the people will reject the bet because the returns are not such high as compared to the losing amount. This example shows that people often behave in a certain way which is not in accordance with the prescriptions of the Subjective Expected Utility Model (SEU).
This article focuses over the effect of framing in the organizational behaviour. To evaluate this, various aspects of the SEU model have been discussed by the author along with analysis of organizational behaviour. It is a study of human behaviour within the workplace in accordance with the organizational settings, policies, standards, etc. This study is being conducted on three levels i.e. individuals in organization (micro-level), work groups (meso-level) and behaviour of organization. It also studies about the behaviour of an individual within the workplace and outside the workplace. Primary goal of organizational behaviour is to “develop a new conceptualisation of organizational life by revitalising the organizational theory”. Typology of framing effects, goal of framing in the organizational context, etc. methods have been discussed by the author in this article with the view to analyse the impact of framing effect over organizational context (Zimmerman & Yahya-Zadeh, 2011).
Researchers have found that the decision makers respond differently in different scenarios by considering the descriptions of every problem. Along with this, studies in relation with the ‘framing effects’ in the section of human judgements and their decision making will be conducted. Classification of various types of framing manipulations will be discussed along with the involvement of valence framing. Foremost classification in this category is risky choice framing under which organizations research about this manipulation many times before implementing this technique into workplace. Organizational behaviour is dependent upon various aspects such as nature of the employees and their concerns related to the workplace environment. In order to improve workplace environment, organization could adopt various measures such as conducting team activities for strengthen the team bond. Apart from this, application of risky choice framework is the strategy under which organization needs to consider its all aspects as it closely associated with the term ‘framing’ (Hartley & Phelps, 2012).
Conclusion
In this article, various methodologies, typology and models have been concluded in relation with the framing effect. Framing effect consist three terms i.e. what is framed and what the frame will affect and the method used for measuring that effect. Framing effect’s impact differs on the basis of age factor i.e. in childhood and adolescence, framing effect will be different as compared with the young adulthood and older adulthood. Framing effect in the decision making is strong in terms of children age because they could easily be convinced. Children does not consider gain or loss while choosing one option and thus, chances for adaptation of risky choices increases as compared to other typologies of framing effect in other age groups. It has been considered children between ages 10-12 take more often risks as compared to the adults because they analyse both the available options and then choose any one in which risk factor is less and the chances for gains are more. Decision making can be termed as the problem solving technique and solution should be satisfactory. This process is more or less rational or irrational based on explicit, beliefs and tacit knowledge.
Decision making procedure is based over human performances, their perceptions as well as on the basis of their knowledge. It this scenario, human performance plays crucial role in terms of decision making process and it is subject to several perspectives:
- Psychological: Evaluating individual decision making procedure based on their needs, requirements, values and preferences.
- Normative: Under this method, decision are evaluated on the basis of logic of decision making, communicative rationality and on the basis of invariant choices (Bruine de Bruin, Parker & Fischhoff, 2012).
- Cognitive:Decision making process is regarded as the continuous process along with the interaction with environment.
The major part of the decision making is the analysis of finite set of alternatives which are described under the evaluating criteria. Further, alternatives are being ranked on the basis of their attractions to the decision makers and by considering all alternatives simultaneously. Amongst the all alternatives, one of the best is being selected by considering the priority for each available alternative. Along with this, this article also includes research for evaluating the most appropriate method for solving such problems and the method is known as multiple-criteria decision analysis (MCDA). This approach is considered as an old approach but many researchers still believe in this method and there are numerous types of MCDA models are available through which varieties of results could be generated along with the application on the same sort of data (Reyna & Brainerd, 2011).
Author has also discussed various aspects of the insights discussed above which could contribute towards future research and in decision making as well. It has been observed that the people’s thinking process is the most significant factor which should be considered by the organizations while preparing advertisement and promotional campaigns. In relation with this, organization will be able to make their promotional campaigns as per customer’s requirements. For example, a tooth paste manufacturing company is planning to launch a new tooth paste with advanced mineral and other ingredients which will cure people’s toothaches. Thus, before promoting the new product in the market, it is necessary to evaluate target audience’s perception. With the help of this, organization will be able to promote their new product in front of them in an effective manner. In this procedure, primary weightage is for the promotional message and the content shown in the advertisement as framing effect is a necessary element in marketing context (Starcke & Brand, 2012).
Major issues of analysing framing effect is that in high pressurised situations, people generally uses intuitive decision making approach rather going for structured approaches in order to save time as well as to resolve the particular problem as quickly as possible. Thus, it has been studies that logical decision making process is considered as the vital element and it is majorly used in science-based professions under which experts review all possible alternatives and then choose an appropriate decision with the view to minimise the risk factor as well as to gain positive outcomes. For example: in a medical based situation where a patient is suffering from a severe disease. In this scenario, experts are required to apply their knowledge and beliefs before application of appropriate diagnosis. In tensed situations such as in emergency situations, experts also adopt intuitive decisions rather adopting structured approaches. This procedure involves a huge risk factor because the method adopted for solving issues is not included in perfect approaches (Griffin & Moorhead, 2011). Sometimes, it also been recognised that experts follow recognition primed decision as per their experience without searching for alternatives.
Along with this, decision maker’s environment also plays crucial role in the decision making process. For example: cognitive function influences by environmental complexities. Complex environment consist of varieties of choices in different states as per time in order to resolve the issues. These parameters could also be used in the future environmental conditions with the view to originate positive side of the framing effect. As per European psychological research, research concerned with decision making is labelled as problem solving (McShane & Von Glinow, 2013).
Above discussed issues are highlighted by the author in this study along with generalising them to provide new insights so that managers and practitioners could be an effective decision maker. Cognitive cost benefit trade-off theory is the most reliable choice which leads to develop compromises between taking an appropriate decision and minimising the efforts. This theory also concentrates on an individual’s efforts. An individual seeks for all available possible and alternative measures to reach to a good decision by minimum usage of cognitive efforts. Simpler method and easy alternatives are only dropped when marketer does not find the solution appropriate for fulling the desires and then he move towards complicated cognitive effort so that a good decision could be taken in relation with fulfilling the desires. However, this is bit explanatory explanation of framing effect. This model also ignores some significant processes through which good decisions could be made (Colquit, Lepine, Wesson & Gellatly, 2011). Apart from these theories, motivational theory is essential for meeting with the objective of individuals related with fears and wishes. Motivational theory explains that framing effect is consequence of hedonic forces. According to author, decision makers could feel displeasure while using these models for reaching towards an appropriate decision rather feelings of pleasure and this difference leads to increase the amount of gain and loss involved in the decision. In other words, practising Prospect Theory’s assumption that losses emerge larger than corresponding gains, motivational models are created on the claim that emotions motivated by losses generally are greater than those motivated by gains (Robbins & Judge, 2012).
On the basis of author’s opinion towards the issues studied in the article, there are various limitations and weaknesses concerned with the framing effect. It is correlated with each and every scenario because framing effect is dependent upon the human behaviour. For example: a company promotes its products and services using various mediums of advertisement and promotion by unique marketing messages and by showcasing unique features of the product. From the perceptive of organization, product or service marketed will be accepted by the audience while it depends upon the human behaviour, beliefs and understanding whether they accept or reject the product. In this manner, organization is required to analyse its target audience’s perceptions, beliefs and understanding so that advertisement campaigns could be created on the basis of their concern (Miner, 2015).
For example: a company is planning to launch a new product in the target market and they have planned to sponsor a special event i.e. award function whose popularity is not much high as compared to other events such as sporting events, cultural events, etc. In this manner, organization will not be able to attain as per their expectations, thus, what company thinks to frame in front of consumers was not exactly done, hence, as per organizational point of view relevant outcomes will not be acquired as per the expectations.
Conclusion
From the aforesaid discussion over framing effect, it can be concluded that framing effect is a psychological concept. It is a cognitive bias through which humans suffers. Humans react on a certain thing unknowingly on the basis of how things are conveyed to them. With the help of the most common example of a pessimist and an optimist, framing effect could easily be evaluated. A Glass of water which is either half full or half empty, both of these true facts but both the perception has their own impact. Positive frame of this situation is that the glass is half full while portraying the negative frame of this situation is that the glass is half empty. These types of frames or tricks are used by the marketers in their advertisement campaigns in order to attract the target audience towards the organizational products and services. These types of frames tend to have in human brains which are known as cognitive bias.
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