Observers penalize decision makers whose risk preferences are unaffected by loss–gain framing.

A large interdisciplinary body of research on human judgment and decision making documents systematic deviations between prescriptive decision models (i.e., how individuals should behave) and descriptive decision models (i.e., how individuals actually behave). One canonical example is the loss-gain framing effect on risk preferences: the robust tendency for risk preferences to shift depending on whether outcomes are described as losses or gains. Traditionally, researchers argue that decision makers should always be immune to loss-gain framing effects. We present three preregistered experiments (N = 1,954) that qualify this prescription. We predict and find that while third-party observers penalize decision makers who make risk-averse (vs. risk-seeking) choices when choice outcomes are framed as losses, this result reverses when outcomes are framed as gains. This reversal holds across five social perceptions, three decision contexts, two sample populations of United States adults, and with financial stakes. This pattern is driven by the fact that observers themselves fall victim to framing effects and socially derogate (and financially punish) decision makers who disagree. Given that individuals often care deeply about their reputation, our results challenge the long-standing prescription that they should always be immune to framing effects. The results extend understanding not only for decision making under risk, but also for a range of behavioral tendencies long considered irrational biases. Such understanding may ultimately reveal not only why such biases are so persistent but also novel interventions: our results suggest a necessary focus on social and organizational norms. (PsycInfo Database Record (c) 2022 APA, all rights reserved).