Lawyer and Nonlawyer Susceptibility to Framing Effects in Out‐of‐Court Civil Litigation Settlement

• DOI: http://doi.org/10.1111/jels.12050
• Author: Mary Thomson,Ian K. Belton,Mandeep K. Dhami
• Date: 01 September 2014
• Published date: 01 September 2014

Lawyer and Nonlawyer Susceptibility to

Framing Effects in Out-of-Court Civil

Litigation Settlement

Ian K. Belton, Mary Thomson, and Mandeep K. Dhami*

Settling a legal dispute out of court is typically a good result for both parties. However, many

disputes do not settle: the presence of cognitive biases, such as those observed through

framing manipulations, is thought to be one of the many reasons for settlement failure. The

present study used quantitative and qualitative data to compare the impact of a gain- or

loss-framed hypothetical civil litigation scenario on settlement decisions made by lawyers and

other nonlawyer professionals. A significant effect of framing was found for both groups. As

predicted, both nonlawyers and lawyers were much more likely to settle their claim in the

gain scenario than in the loss scenario. This finding was supported by the qualitative data:

risk-averse comments were more frequent in the gain frame whereas risk-seeking statements

were more common in the loss frame. There was also evidence that lawyers may be less

affected by framing than nonlawyers, although a smaller difference was observed than in

previous studies. In addition, lawyers were more likely than nonlawyers to consider the

expected financial value of the litigation in making their decision. We discuss the implica-

tions of these results and suggest avenues for future research.

I. Introduction

This article is comprised of four sections. Section I reviews the literature on the framing

effect, as it relates to legal decision making. Sections II and III present an empirical study

of the framing effect in the context of out-of-court civil litigation settlement. Section IV

discusses the results of that study.

Human behavior is commonly perceived as “rational” in the sense that we

have the capacity to reason our way logically to an optimal decision for any given situa-

tion, based on the information available. Expected utility theories1take a normative

*Address correspondence to Ian Belton; email: iankbelton@yahoo.co.uk. Belton is a qualified solicitor (England and

Wales; Queensland) and graduate student at Middlesex University; Thomson is Reader in Decision Psychology,

Newcastle Business School; Dhami is Professor of Decision Psychology, Middlesex University.

1Von Neumann and Morgenstern (1944), cited in D. Kahneman & A. Tversky, Prospect Theory: An Analysis of

Decision Under Risk, 47 Econometrica 263 (1979). See also, e.g., P. Slovic, B. Fischhoff & S. Lichtenstein, Behavioral

Decision Theory, 28 Ann. Rev. Psychol. 1 (1977).

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Journal of Empirical Legal Studies

Volume 11, Issue 3, 578–600, September 2014

578

approach to rationality—that is, they propose how rational individuals ought to

act—and assume consistency and coherence in the decision-making process. A core

principle is that individuals act to maximize their self-benefit or “utility” in any given

situation.

However, Kahneman and Tversky2observed that in many situations, people behave in

ways that are incompatible with coherent utility-maximizing behavior and therefore violate

the principles of expected utility theories. They considered these results in light of Herbert

Simon’s concept of “bounded rationality”; the idea that people lack the cognitive capacity

to analyze problems in a fully rational way and instead rely on “heuristics,” simple rules of

thumb that allow them to make reasonably accurate decisions quickly and efficiently

without using many cognitive resources. According to Simon, people “satisfice” (i.e., settle

on a solution that is “good enough”) rather than “optimize” when making decisions.3

Subsequent research by Tversky and Kahneman and others has identified a wide range of

systematic deviations from normatively rational behavior, often referred to collectively as

“cognitive biases.”4

One such cognitive bias is the “framing effect.” Normative theories espouse the

principle of invariance, whereby an individual’s preference should be independent of the

way in which a choice is presented. In contrast, the framing effect describes how an

individual’s approach to a problem depends on the way it is described or framed.5Specifi-

cally, in a choice task, if an outcome is perceived as a gain, individuals will tend to choose

a smaller, but definite, gain over one that is potentially larger but entails risk (or uncer-

tainty). Conversely, if the outcome is perceived to be a loss, rather than accepting a definite

loss, individuals will tend to risk losing more for the chance to lose nothing at all. For

example, Kahneman and Tversky6found that most people preferred a definite gain of $800

to an 85 percent chance to win $1,000 (with a 15 percent chance of gaining nothing), while

most rejected a definite loss of $800 in favor of an 85 percent chance to lose $1,000 (with

a 15 percent chance of losing nothing). Framing has been studied extensively and a robust

2See, e.g., D. Kahneman & A. Tversky, Subjective Probability: A Judgment of Representativeness, 3 Cognitive

Psychol. 430 (1972); D. Kahneman & A. Tversky, On the Psychology of Prediction, 80(4) Psychol. Rev. 237

(1973); D. Kahneman & A. Tversky, Prospect Theory: An Analysis of Decision Under Risk, 47 Econometrica

263 (1979); A. Tversky & D. Kahneman, The Framing of Decisions and the Rationality of Choice, 211 Science 453

(1981).

3See H.A. Simon, Rational Choice and the Structure of the Environment, 63 Psychol. Rev. 129, 129 (1956).

4See, e.g., D. Kahneman, P. Slovic & A. Tversky (eds.), Judgement Under Uncertainty: Heuristics and Biases

(Cambridge University Press 1982); T. Gilovich, D. Griffin & D. Kahneman (eds.), Heuristics and Biases: The

Psychology of Intuitive Judgment (Cambridge University Press 2002).

5Kahneman and Tversky (1979), supra note 2; Tversky and Kahneman (1981), supra note 2.

6D. Kahneman & A. Tversky, Choices, Values and Frames, 39(4) Am. Psychol. 341 (1984).

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