Final answer:
Most people are risk-averse when decisions are framed positively, and risk-seeking when decisions are framed negatively. Informational social influence is more likely when the answer is unclear and the group has expertise. Investment decision-making involves balancing the tradeoff between return and risk, often influenced by personal preferences.
Step-by-step explanation:
When it comes to decision-making, framing significantly impacts how individuals perceive risk. Most people are risk-averse when the decision is framed positively, meaning they are more likely to avoid risk when the potential outcomes are presented in a good light. Conversely, individuals are risk-seeking when the decision is framed negatively, indicating that when potential outcomes are presented in a less favorable light, people are more willing to take risks to avoid losses.
In terms of informational social influence, it is more likely to occur when the answer is unclear, and when the group has expertise. The rationale behind this is that individuals look for guidance from those with more knowledge when they are uncertain, aiming to make a choice that they perceive as correct. Additionally, people often conform to group norms when they want to fit in, which can also result in informational social influence.
The tradeoff between return and risk complicates the task of financial investors. Whether to invest safely or take a risk for higher returns is influenced by personal preferences. However, examining risk and return within different time frames can be useful in making investment decisions that align with one's own risk tolerance and financial goals.