Question

Suppose 1,000 students were split into two groups of 500. Both groups were first presented with an image of a new high-end pair of jeans produced by Tommy Hilfiger, a clothing company. The first group was given the following statement and then asked the following question: "The normal retail price of these jeans is $100. Would you be willing to pay $75 for them?" The second group was given the following statement and then asked the following question: "The normal retail price of these jeans is $250. Would you be willing to pay $75 for them?" Suppose that 24% of the students in the first group answered yes and that 73% of the students in the second group answered yes. It is likely that more students in the second group were willing to pay $75 for the pair of jeans because they were told the normal price was much higher. This is an example of a ________ effect in decision-making.

Answer 1

Question Completion:

A) clothing B) marketing C) utilitarian D) framing E) psychosomatic

Answer:

This is an example of a ___framing_____ effect in decision-making.

Explanation:

The framing effect in decision-making means that decisions are influenced by the different semantic descriptions of the same issue.  This different framing of the same issue causes people to develop different risk preferences, indicating that their decisions are based on the potential value of losses they would suffer or gains they would garner rather than the final outcome.