Rohit had the opportunity to choose between two investments. The first investment was described as having a 30% chance of succeeding, while the second investment was described as having a 70% chance of failing. Rohit opted for the first investment because he thought it sounded less risky than the second investment. The chances of succeeding and failing are the same for the two investments, however, which implies that Rohit is subject to
A) a framing bias.
B) overvaluing the present relative to the future.
C) overconfidence.
D) a sunk cost fallacy.

Question

Quizplus · Accepted Answer

Rohit's decision was influenced by how the options were presented or "framed" rather than by an objective analysis of the probabilities. Both investments had a 30% chance of success (or a 70% chance of failure), but he perceived the first investment as less risky because it was framed in terms of success rather than failure. This is a classic example of framing bias, where the way information is presented affects decision-making.

Rohit Had the Opportunity to Choose Between Two Investments