Reference-dependent gain-loss utility

Assignment Help Business Economics
Reference no: EM132608473

Let two dimensions of choice be mugs and money, with mugs being dimension 1 and money being dimension 2. Denote outcomes in mugs and money by c1 and c2, respectively, and reference points in the two dimensions by r1 and r2, respectively. The person's utility is given by:

4c1 + c2 + v(4c1 - 4r1)+ v(c2 - r2), where v(x) = 0.5x for x ≥ 0, and v(x) = 2x for x < 0. You can think of the first part of the utility function (4c1 + c2) as standard "consumption utility," and the second part (v(4c1 - 4r1)+ v(c2 - r2)) as the reference-dependent "gain-loss utility."

Consider a scenario where some subjects (called the "choosers") are initially not given a mug or any money. Then, they are told that they can either have the mug or money, and are asked for the minimum amount of money which they would be willing to accept instead of the mug. Solve for this "choosing price."

Reference no: EM132608473

Questions Cloud

What is the price elasticity of demand for x : If with the rise in price of good X, the quantity purchased of good Y remains unchanged, what is the price elasticity of demand for X?
Effective treatment of acid mine drainage : Elaborate on utilization of algal and fungal exopolysaccharides for effective treatment of Acid Mine Drainage
Find the equilibrium quantity and price for a product : Find the equilibrium quantity and price for a product and sketch the system where represents price per unit in dollars and represents the number
Purely competitive market : Its output is 300 units which sell for 10 each. At this level of output marginal cost is 1 and average variable cost is 1.50 the firm should?
Reference-dependent gain-loss utility : Denote outcomes in mugs and money by c1 and c2, respectively, and reference points in the two dimensions by r1 and r2, respectively.
Discuss on recent perspectives of bioprocessing food wastes : Discuss on recent perspectives of bioprocessing food wastes into value added products.
Define why performance appraisal should not be eliminated : The effectiveness of the performance appraisal is often a topic of debate. Read the Forbes article, "Eliminating Performance Appraisals". Based on the content.
Macro-economic policies and the target rates : What are the 3 goals of macro-economic policies and the target rates?
What are 3 of the 4 phases of the classical business cycle : Why doesn't the government print money in order to solve its debt problems?

Reviews

Write a Review

Business Economics Questions & Answers

  Where do start-ups get their money

An In the News article is titled "Where Do Start-ups Get Their Money?" Venture capital is important to an economy because it

  Derived the optimal combinations of labor and capital

The production engineers at Impact Industries have derived the optimal combinations of labor and capital. These are the only two inputs used by Impact. The following chart shows the combinations of labor and capital for three levels of output. Q is t..

  Helping to slow down the economy

During a boom, when inflation is perceived to be a greater problem than unemployment, the government can run a budget surplus, helping to slow down

  What is the coefficient of variation for panda

Panda INC. stock has an expected return of 9% and a standard deviation of 12%. What is the coefficient of variation for Panda?

  How many different groupings can be made for a national

How many different groupings can be made for a national championship college footbal playoff pool from 25 teams if only the top 4 make the grouping

  Elucidate how has the number of payroll jobs changed

Elucidate how has the number of payroll jobs changed over the last 3 months and over last year in Antigua and Barbuda.

  What is equilibrium price and quantity

Let’s say that there are 25 firms in a (perfectly competitive) market each with an inverse short-run supply curve of P = 1.25q + 12.5. If the market demand curve equals Q= 750 - 30P, what is equilibrium price and quantity, and how much does each indi..

  Midpoint? formula-calculate the price elasticity of demand

Using the midpoint? formula, calculate the price elasticity of demand if a price rise from? $8 to? $10 and decreases the quantity demanded from 20 units to 15 units. The price elasticity of demand? (in absolute? value) equals. If an increase in the p..

  What is the total cost producing widgets

What is MPL, MPK, APL, APK? How much labor and capital would be required to minimize the cost of producing 200 widgets? What is the total cost producing 200 widgets?

  Conudct masonary and general contracting business

C.E. Stumpf & sons, Inc., was formed to conudct a masonary and general contracting business. the corporation waso owned in equal shares by Stumpf and his two sons, who had previously operated the same business as partners. He brought suit seeking inv..

  Influence peoples decision-making regarding fuel efficiency

How might you use information about design concepts to help you make future decisions? For example, when reading studies reported in newspapers or magazines how will the nature of the study influence your decisions to either take action or change you..

  In a competitive labor market-the equilibrium wage rate

In a competitive labor market, the equilibrium wage rate and the number of workers employed are determined by labor supply and labor demand. Firms maximize profit where the MRP = MRC and hence hire labor up to this point. What do you think could be t..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd