Final answer:
The client's preference for the investment presented in terms of potential gains over the one presented in terms of potential losses reflects the framing effect, which affects decision-making by how choices are presented.
Step-by-step explanation:
The client's decision to select the first investment, which is framed in terms of potential gains, reflects the framing effect. This cognitive bias illustrates how people react differently to a particular choice depending on whether it is presented as a loss or a gain. The framing effect is often discussed in the context of behavioral economics and indicates how the way information is presented can influence and potentially skew decision-making.
In the absence of additional information, the investor's preference for the opportunity presented in terms of gains over losses is a classic example of how individuals are influenced by loss aversion. This concept, introduced by behavioral economists Daniel Kahneman and Amos Tversky, suggests that people exhibit a psychological bias to prefer avoiding losses rather than acquiring equivalent gains; it's the idea that the pain of losing is psychologically about twice as powerful as the pleasure of gaining.
Therefore, the scenario describes the framing effect clearly as it relates to the client's aversion to loss when evaluating investment opportunities.