Don't like the picture? Change the frame: the impact of cognitive ability and framing on risky choice

This paper identifies the effect a perceived up-front cost has on subsequent risky choice of older Americans. When respondents are faced with outcome alternatives framed in an up-front cost and no up-front cost domain, we observe variation in the respondents’ required outcomes based on the order in which the two domains are presented. We provide evidence that among respondents with lower cognitive ability, losses need not be realized to affect subsequent risky choice, and that an up-front cost lowers the willingness to take risk in a future period. Implications for annuitization demand are discussed.