For each of the following scenarios, identify whether it is best explained as an example of overconfidence, availability bias, anchoring bias, representativeness bias, focusing illusion, or loss aversion.

a. Dorothy watched news reports about a devastating tornado in a neighboring state. In response, she decides to quadruple the amount of home insurance that she currently has.

b. David is the risk manager at a mortgage company. In 2007, he was asked by his boss to estimate the probability that 20% of the company’s borrowers would default on their loans at the same time. David stated that this was extraordinarily unlikely, so the firm should not worry about loaning to too many risky borrowers. A year later, mortgage default rates were at an alltime high.

c. Mandy was working at a Fortune 500 company earning $200,000 per year before she lost her job during a recession. The economy has largely recovered and she has received several job offers, but Mandy is still unemployed because she refuses to accept any job that pays her less than $200,000 per year.