8.Match each of the vignettes below with one of the following phenomena: anchoring and adjustment, compromise effect, failure to consider opportunity costs, loss aversion, and sunk-cost fallacy. If in doubt, pick the best fit. Be sure to explain your answers.

(a)Sam has just arrived at the airport when he realizes that he has forgotten the $20 travel pillow he bought last night. There are more travel pillows available at the airport shops for the same price. But Sam feels there is no way he is going to pay $40 in total for a travel pillow. He is angry with himself all the way through the 12 hours journey in the air.

(3points)

(b)Alison is buying a new coat and she sets her eyes on a grey one and a pink one, she considers that there is no difference between the two except the color. However, the pink one used to be $899 and the grey one $599; both are on sale for $399. Alison has no particular preference for pink, and feels that it is hard to dress matching. Still, thinking about what these coats used to cost, it seems to her that the pink coat is a better deal.

(3points)

(c)The owners of the local fruit and vegetable shop decide that they want to encourage their customers to pay by cash instead of credit card. They decide that the customers would be upset if the store started imposing credit-card surcharges. Instead, they gradually raise the prices of their products by an average of 3 percent, and give people who pay by cash a 3 percent discount. Current customers have no problem with this arrangement.

(3points)

(d)Politicians in favor of higher taxes would say they plan to cancel scheduled tax cuts, but these politicians are being criticized by the opposing party for increasing taxes.

(3points)

(e)Erica is a highly paid lawyer with no shortage of work. She bills 50 hours a week and derives no additional benefit in working long hours except for the money, she finds herself not as happy as she anticipated 3 years ago when her average billing hours was only 25hrs per week.

(3points)