The Legal Analyst: A Toolkit for Thinking about the Law

By Ward Farnsworth | Go to book overview

24 Framing Effects

Sometimes decisions are affected by the way they are framed: how the alternatives are described, or in what order they are arranged. The simplest example is sometimes known as the compromise effect—the attraction people feel to a middle option, even if its “middleness” is the result of arbitrarily surrounding it with other choices. In the classic experiment the subjects were instructed to choose cameras from a catalogue. If they were given two choices—a midlevel model and a low-end one—they divided about evenly between them. But the subjects who were given a third choice—a high-end model—showed quite different tendencies. Of course some preferred the fancy camera, but the interesting result was that they tended to abandon the low-end version: of those picking between the middle and low model, 72 percent picked the middle choice. The addition of the new option at the top dragged people from the bottom to the middle.45Contrast effects are similar. An option is less appealing alone than when set against another option that is clearly inferior. This time the bestknown experiment involved offering subjects a choice between a fancy pen and a payment of six dollars. Most of them took the money. But when a third choice was added—a lousy pen—significantly more subjects chose the fancy pen rather than the cash. It evidently looked more impressive sitting next to a lesser specimen of the same kind.46

The value of understanding these points for advertising executives and consumers is obvious. Their significance for lawyers also is large, and is illuminated in a fine set of studies showing how the same questions of context can affect the negotiations to settle a lawsuit. The subjects in one of the experiments were given a mock case to try to settle; they were told to assume they were representing a plaintiff with a nuisance complaint against a noisy nightclub next to his house. The subjects were to pick between settlement offers from the nightclub, two of which were initially put on the table: (a) an offer to reduce the nightclub’s noise and (b) an offer to compensate the plaintiff with cash and a stay in a nice hotel on weekends. The subjects divided about evenly between these. Then to another group a third proposal was offered: less cash, but some vouchers that could be used at other nightclubs. This offer was designed to

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The Legal Analyst: A Toolkit for Thinking about the Law
Table of contents

Table of contents

  • Title Page iii
  • Contents v
  • Preface vii
  • Acknowledgments xi
  • Part I - Incentives 1
  • 1 - Ex Ante and Ex Post 3
  • 2 - The Idea of Efficiency 13
  • 3 - Thinking at the Margin 24
  • 4 - The Single Owner 37
  • 5 - The Least Cost Avoider 47
  • 6 - Administrative Cost 57
  • 7 - Rents 66
  • 8 - The Coase Theorem 75
  • Part II - Trust, Cooperation, and Other Problems for Multiple Players 85
  • 9 - Agency with Eric Posner 87
  • 10 - The Prisoner's Dilemma 100
  • 11 - Public Goods 109
  • 12 - The Stag Hunt 117
  • 13 - Chicken 126
  • 14 - Cascades 136
  • 15 - Voting Paradoxes 144
  • 16 - Suppressed Markets with Saul Levmore 152
  • Part III - Jurisprudence 161
  • 17 - Rules and Standards 163
  • 18 - Slippery Slopes with Eugene Volokh 172
  • 19 - Acoustic Separation 182
  • 20 - Property Rules and Liability Rules 188
  • 21 - Baselines 198
  • Part IV - Psychology 207
  • 22 - Willingness to Pay and Willingness to Accept- The Endowment Effect and Kindred Ideas 209
  • 23 - Hindsight Bias 218
  • 24 - Framing Effects 224
  • 25 - Anchoring 230
  • 26 - Self-Serving Bias, with a Note on Attribution Error 237
  • Part V - Problems of Proof 247
  • 27 - Acoustic Separation 249
  • 28 - Standards of Proof 257
  • 29 - The Product Rule 273
  • 30 - The Base Rate 281
  • 31 - Value and Markets 294
  • Notes 305
  • Author Index 329
  • Subject Index 335
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