Abstract

Although there was a speculation that the individuals can make rational decisions,
studies show that, in terms of making decisions, individuals often commit errors. This error is
called bias in decision-making and the most common error is violating the principle of
invariance (Kahneman & Tversky, 1986). Invariance means that changes in the descriptions of
alternatives decision should not alter preferences. But it is demonstrated that the presentation
of a problem having different formulations tend to alter an individual's decision. (Reyna,
2004). A person tends to choose differently depending on how the situation is presented,
which is called framing effect. When alternatives are formulated in terms of gain the subjects
prefer safe situations (risk aversion) and when alternatives are formulated in terms of loss
subjects assume the risk (risk seeking). In this study we highlight the impact of negative and
positive emotions in framing effect because according to authors, subjects experiencing
negative emotions are focused on the negative consequences of an alternative, while subjects
who experience positive emotions have the opposite effect.

Keywords: positive emotions, negative emotions, framing effect, risk aversion, risk seeking