What characterizes a conjunction fallacy?

The conjunction fallacy occurs when people incorrectly believe that the combination of two events is more probable than either event occurring individually. This cognitive bias reflects how individuals may combine probabilities in a way that supports their beliefs or interpretations of a scenario, even when logic dictates otherwise.

For instance, if presented with two scenarios, such as a person being a bank teller and an avid feminist, people might mistakenly assess the joint occurrence as more likely than the individual scenario of the person merely being a bank teller. This fallacy illustrates a misunderstanding of probability rules and often arises from representativeness heuristics, where people judge the probability of an event based on how closely it resembles their understanding of stereotypes or existing beliefs.

Understanding this concept is crucial in fields such as behavioral finance and decision-making, where the clarity in assessing independent outcomes can significantly affect investment choices and risk management. The other options pertain to valid aspects of probability and risk assessment but do not capture the essence of how individuals misjudge probabilities when they conflate multiple events, which is the hallmark of the conjunction fallacy.