Suppose that Ike is loss averse. In the morning, Ike’s stockbroker calls to tell him that he has gained $1,000 on his stock portfolio. In the evening, his accountant calls to tell him that he owes an extra $1,000 in taxes. At the end of the day, does Ike feel emotionally neutral since the dollar value of the gain in his stock portfolio exactly offsets the amount of extra taxes he has to pay?
7. You just accepted a campus job helping to raise money for your school’s athletic program.
You are told to draft a fund-raising letter. The bottom of the letter asks recipients to write down a donation amount. If you want to raise as much money as possible, would it be better if the text of that section mentioned that your school is ranked third in the nation in sports or that you are better than 99 percent of other schools at sports? Explain.
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