Abstract

Expected Utility Theory (EUT) has anomalies when interpreted descriptively and tested empirically. Experiments show that the way in which options are formulated is, in most cases, relevant for decision-making. This kind of anomaly is directly related, however, not with a proper axiom of EUT but rather with the logical principle of extensionality and its decision theoretic version: the principle of invariance. This paper focuses on the phenomenon of framing effects (FE) and the associated failures of invariance. FE arise when different descriptions of the same object lead to different preferences, beliefs, or choices. A formal reconstruction of the Gain–Loss (G-L) frame is proposed, expanding the domain of standard decision theory to incorporate not only prospects but also descriptions of prospects. The system is extended by adding non-monotonic logical resources so as to account for the ceteris paribus character of FE. Finally, the same method is applied to sketching a formal representation for an anomalous case that involves subjective probabilities. The logical method is a general one that can be applied to most cases of FE. The philosophical consequences of the strategy pursued are also discussed.