An Empirical Examination of Different Interpretations of the Prospect Theory\'s Framing-Hypothesis

The Prospect-Theory only vaguely specifies the factors expected to determine the decision maker's reference points and therefore the emergence of framing-effects. This theoretical shortcoming is demonstrated, using the usually proposed explanation for the wording-effects observed in the context of the Asian Disease problem (ADP). Various possible interpretations of the Prospect Theory's framing-hypothesis are proposed. Accordingly, the framing-effects may be caused either by the presence of positive or negative linguistic symbols, or may be the result of positive or negative outcomes presented under the different framing-conditions. A third interpretation could be that both dimensions must occur simultaneously in order to cause framing-effects. Appropriately modified versions of the ADP are used to test the independent explanatory power of each isolated factor. None of the possible interpretations of the Prospect Theory's framing-hypothesis can be confirmed. It is concluded that other processes and determinants, not considered in the framework of the Prospect Theory, must be regarded as responsible for the observed wording-effects.