Claude and Marie are excited because they have just bought a restaurant from the previous owners. The two partners know that the last seven restaurants that have been operated at that location have gone bankrupt within a year of their openings, but Claude and Marie are certain their restaurant will be successful because they plan on working hard to be a success. What are the two new business partners doing in this case?

Question

Quizplus · Accepted Answer

The two partners are apparently ignoring base rates, which suggest that the probability of their restaurant succeeding is low based on the history of previous restaurants in the same location. They are hoping that working hard is enough to overcome this history, which is not necessarily true.

Claude and Marie Are Excited Because They Have Just Bought