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Friday, May 4, 2012

Bounded Ethicality: The Perils of Loss Framing

By Mary C. Kern and Dolly Chugh
Psychological Science
(2009) Volume 20, Number 3, pp 378-384


Ethical decision making is vulnerable to the forces of automaticity. People behave differently in the face of a potential loss versus a potential gain, even when the two situations are transparently identical. Across three experiments, decision makers engaged in more unethical behavior if a decision was presented in a loss frame than if the decision was presented in a gain frame. In Experiment 1, participants in the loss-frame condition were more likely to favor gathering ‘‘insider information’’ than were participants in the gain-frame condition. In Experiment 2, negotiators in the loss-frame condition lied more than negotiators in the gain-frame condition. In Experiment 3, the tendency to be less ethical in the loss-frame condition occurred under time pressure and was eliminated through the removal of time pressure.



In the studies reported here, we explored the effect of automaticity on the cognitions and behaviors of decision makers in the moment of ethical choice. What are the roles of the decision maker’s cognitive framing of the situation and the decision maker’s available cognitive resources?  We turned to framing effects (Tversky & Kahneman, 1981) as the foundation of our inquiry.  The transformative effects of framing are well established (for reviews, see Camerer, 2000; Kuhberger, 1998). A framing effect occurs when transparently and objectively identical situations generate dramatically different decisions depending on whether the situations are presented, or perceived, as potential losses or gains (Tversky & Kahneman, 1981). Framing effects are integral to prospect theory (Kahneman & Tversky, 1979; Tversky & Kahneman, 1981), a model of choice that describes an ‘‘S-shaped value function’’ to illustrate the differences in how gains and losses, relative to a reference point, are valued. A critical feature of this curve is that it has a steeper slope in the loss domain than in the gain domain. As a result, people are loss averse; that is, they are willing to go to greater lengths to avoid a loss than to obtain a gain of a similar size (Kahneman, Knetsch, & Thaler, 1990; Tversky & Kahneman, 1991).

We considered the implications of framing effects for ethics.  When making decisions, individuals often choose from an array of possible responses, with some choices being more, or less, ethical than others. Given the previous work on framing effects, we reasoned that individuals who perceive a potential outcome as a loss will go to greater lengths, and engage in more unethical behavior, to avert that loss than will individuals who perceive a similarly sized gain. This logic formed the initial basis for the present research.