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Which one of the following refers to the 'framing effect' in the context of decision making?1. The way in which options are presented influence the selection of option2. Choosing the option having highest expected utility3. A kind of set points of thought in wrong direction4. Looking for evidences that will confirm what are currently believes

Answer» Correct Answer - Option 1 : The way in which options are presented influence the selection of option

The correct answer is The way in which options are presented influence the selection of option.

  •  The framing effect occurs when decision-makers choose inconsistent solutions for identical problems based on the way the problems are presented to them.
  • As a cognitive bias, framing effect is a major threat to the quality of decision-making and can incur substantial costs to organizations and societies.
  • People tend to avoid risk when a positive frame is presented but seek risks when a negative frame is presented.
  • In other words, we are influenced by how the same fact or question is presented.
  • Prospect theory states that individuals are more sensitive to losses than gains, so we tend to become risk-averse.
  • When presented with a 50-50 chance of gaining or losing an equal amount, we tend to avoid such a choice.


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