Question

When you buy a new pair of shoes, it may initially provide a small boost in pleasure. However, even if you never wear the shoes, giving them away a year or two later might be incredibly painful. You never use them, but for some reason you just cannot stand parting with them. Which concept about decision-making best applies to this situation? 1. The anchoring & adjustment heuristic 2. Loss aversion theory 3. Hindsight bias 4. The planning fallacy 5. The framing effect Consider the following: "Todd enjoys listening to New Age music and faithfully reads his horoscope each day. In his spare time, he practices meditation and attends meetings at a local spirituality center." Question: Do you think Todd is more likely to be a school teacher or a holistic healer? Research has shown that many people will answer, "Todd is more likely to be a holistic healer." But in reality, it is far more likely that Todd is a school teacher based purely on probability. This is because school teachers are statistically far more common than holistic healers. Which decision making heuristic applies to this error? 1. The conjunction fallacy 2. The availability heuristic 3. The representativeness heuristic 4. The framing effect 5. Confirmation bias

Answer 1

1. The correct answer is Option 2. This is best explained by the loss aversion fallacy. It refers to our stronger preference of avoiding losses in comparison to acquiring gains.

2. The correct answer is Option 1. This is an example of the conjunction fallacy. It occurs when people mistakenly assume that specific conditions are more probable than general ones.