Carol's university puts a cap of $10,000 on the combined aid and scholarship money a student can receive. As a freshman, Carol had received $7,500 in combined loans and scholarships. For her second year, Carol won a competitive $5,000 scholarship, and her previous aid package was reduced by $2,500. According to prospect theory what will Carol's strongest feeling be?
A) pride in winning the $5,000 scholarship
B) happiness about the added $2,500 in her aid package
C) sadness over losing $2,500 of her previous aid package
D) happiness over having scholarship and aid money

Question

Quizplus · Accepted Answer

According to prospect theory, individuals tend to feel the pain of losses more strongly than the pleasure of gains. Therefore, Carol's strongest feeling is likely to be sadness over losing $2,500 of her previous aid package. The added $5,000 scholarship and remaining aid package may still be seen as a positive outcome, but the loss of $2,500 may have a greater impact on her emotions.

Carol's University Puts a Cap of $10,000 on the Combined