Judgment in Managerial Decision Making, 8th Edition

CHAPTER FIVE

Framing and the Reversal of Preferences

The following is one of the most famous problems in the decision-making literature. Please make the best choice possible (Tversky & Kahneman, 1981):

Problem 1. Imagine that the United States is preparing for the outbreak of an unusual Asian disease that is expected to kill 600 people. Two alternative programs to combat the disease have been proposed. Assume that the exact scientific estimates of the consequences of the programs are as follows.

Program A: If Program A is adopted, 200 people will be saved.

Program B: If Program B is adopted, there is a one-third probability that 600 people will be saved and a two-thirds probability that no people will be saved.

Which of the two programs would you favor?

There are a number of factors you might consider when evaluating these options. For example, what will be the impact of each program on the broader society? Who is most at risk for the disease? Which option would provide the greatest benefit? There are many other questions you might ask. But if you had to pick Plan A or Plan B based only on the information given in the problem, which program would you choose? Most people choose Program A.

Let's consider how you might think through this decision. One simple rule for making decisions is always to select the alternative with the highest expected value— the strategy that provides the best outcome, on average. But, as you can see, the expected values of the two programs are equal. ...