Asked by Jeannie Howell on May 30, 2024
Verified
Lucy bought some stock 10 years ago that has been priced at half of her purchase price for the past 5 years.However,Lucy refuses to sell the stock,thinking that,if she waits long enough,she will recover her investment.What type of behavior does this represent?
A) mental accounting
B) bounded rationality
C) risk aversion
D) loss aversion
Loss Aversion
Oversensitivity to loss, leading to an unwillingness to recognize a loss and move on.
Mental Accounting
The habit of mentally assigning dollars to different accounts so that some dollars are worth more than others.
- Discern assorted behavioral predispositions and their repercussions on economic selections.
Verified Answer
TG
Taylor GainesJun 02, 2024
Final Answer :
D
Explanation :
This behavior represents loss aversion, where Lucy is unwilling to sell the stock at a loss and is holding onto it in hopes of recovering her initial investment.
Learning Objectives
- Discern assorted behavioral predispositions and their repercussions on economic selections.
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