Frame Dependence


DEFINITION of 'Frame Dependence'

The human tendency to view a scenario differently depending on how it is presented. Frame dependence is based on emotion, not logic, and can explain why people sometimes make irrational choices. For example, when presented with a scenario in which a sweater is being offered at its full price of $50 and a scenario in which the same sweater is regularly priced at $75 but on sale for $50, many consumers would perceive the latter as a better value even though in both situations they are being asked to pay the same price for the same sweater. Thus a real-life application of frame dependence is the use of strategic pricing by retail stores to influence consumers' purchasing behavior.

BREAKING DOWN 'Frame Dependence'

Frame dependence is one component of psychologist Daniel Kahneman's Nobel Prize-winning prospect theory, a major contribution to behavioral economics. Along with co-researcher Amos Tversky, Kahneman showed several cognitive biases that cause people to make irrational decisions, including the anchoring effect, loss aversion, mental accounting, the planning fallacy and the illusion of control.

  1. Daniel Kahneman

    A professor emeritus of psychology and public affairs at Princeton ...
  2. Anchoring

    The use of irrelevant information as a reference for evaluating ...
  3. Behavioral Finance

    A field of finance that proposes psychology-based theories to ...
  4. Prospect Theory

    A theory that people value gains and losses differently and, ...
  5. Behaviorist

    1. One who accepts or assumes the theory of behaviorism (behavioral ...
  6. Mental Accounting

    An economic concept established by economist Richard Thaler, ...
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