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

Previous Q& A

  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?

  Detailed description of mortgage-backed securities

For this submission, you must also add a detailed description of mortgage-backed securities in the context of the Global Financial Crisis:

  Difference between a progressive and regressive tax

What is the difference between a progressive and regressive tax? Which one is less equitable to those in the lower class and why?

  What are the 3 functions of money

What are the 3 functions of money?

  What is the importance of measuring gdp

What is the importance of measuring GDP on a per capita basis?

  What future problems would result from scarce resources

What future problems would result from scarce resources

  Is it a function of personnel-human resource departments

Why is staffing important? Who is responsible for it? Is it a function of personnel/human resource departments? What are some of the ways managers can adapt.

Reviews

Write a Review

 

Similar Q& A

  Implications of iceland debt crisis for other countries

What were the potential implications of Iceland's debt crisis for other countries? How might the crisis have affected the entire international monetary system?

  Projected life of each facility

Two facilities are being evaluated, with the projected life of each facility being 10 years. The cash flows for each facility are shown in the table below.

  Vroom expectancy theory of motivation

What do you think Vroom's expectancy theory of motivation stands for? In a multicultural environment, what are the multinational management implications.

  Should the government be rationing radio wave frequencies

Should the government be rationing radio wave frequencies to ensure an efficient outcome in the broadcasting market in the presence of negative externalities from frequency overlap?

  A firm under monopolistic competition will earn

If the demand curve is QD = 100 - 10P and there is a $1 price increase, then the elasticity of demand at P = 2 is 2. If the absolute value of a demand elasticity is less than 1, then

  Comparative advantage and trade work

Both outsourcing and sweatshops show how comparative advantage and trade work. Outsourcing has a bad reputation in the U.S. but it is simply comparative advantage in action.  Sweatshops also have a bad reputation.

  Relationship between unemployment and real gdp

The working age population is 68,690 and the labour force participation rate is 73.6%. Use this information to find the following.

  Government efforts to manage

Do you believe government efforts to manage the economy usually make things better or worse?

  Aggregate expenditure is total amount of spending in economy

Aggregate expenditure is the total amount of spending in the economy that determines the level of the GDP. Components of aggregate expenditure are autonomous expenditure, planned private investments, government expenditure, and net exports. When auto..

  What each of these three graphs is trying to convey

Graphs are important, and not just for economics. They convey, relay, interpret, visualize, support and contradict, explain and explain away many of the things we come across in our daily lives both personally and professionally. Explain to us what e..

  Is this really inflation explain how

If the price of coffee increases, we get a positive rate of inflation, even if no other price rises. Is this really inflation? Explain.

  Give an example of company that uses consumer arbitration

There is an ongoing debate over the use of arbitration clauses in consumer contracts. Differences between arbitration and litigation include the costs charged to the parties, the speed of resolution, Give an example of a company that uses consumer ar..

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