Endowment Effect and Willingness to Accept An experiment gives 50 students a coffee mug valued at $6. Later, students are asked the minimum amount for which they would sell the mug (willingness to accept). The average asking price is $10. None of the students without mugs are willing to pay more than $6 to buy one (willingness to pay). (a) Compare the willingness to accept with the willingness to pay, and use the endowment effect to explain the discrepancy. Note:- Do not provide handwritten solutio
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Endowment Effect and Willingness to Accept An experiment gives 50 students a coffee mug valued at $6. Later, students are asked the minimum amount for which they would sell the mug (willingness to accept). The average asking price is $10. None of the students without mugs are willing to pay more than $6 to buy one (willingness to pay). (a) Compare the willingness to accept with the willingness to pay, and use the endowment effect to explain the discrepancy.
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- Who detected the endowment effect first? Tell us about the design of the experiment and its main conclusions.Economics Match the heuristic with the scenario it best demonstrates. Consider the experiment. People are on the beach and they want ice cream. Vendor A fills up a 12oz cup with 8oz of ice cream (it's nearly half empty) while vendor B fills up a 5 oz cup with 7 oz ice cream (so the ice cream is over flowing). A. Survey results indicate that people's willingness to pay for the overfilled ice cream was higher than the under-filled. The interpretation was that people had a more positive feeling of satisfaction getting an overfilled cup. v availability heuristc v representativeness heuristic When asked to rank the rates of different causes of death, people are more likely to rate firearm related deaths as higher than other B. causes because they watch and hear about firearms more frequently in the news (even though death by drug overdoses, for example, rank higher). v Jaffect heuristic Tim is tough, hard-working and outdoorsy. Is he more likely to be a farmer or a teacher? Many people…The goal of the consumer is to maximize the total utility or satisfaction derived from their purchase choices, given the unique budget constraint. To calculate total utility of a given combination of T- shirts and movies, one would use the following approach: Group of answer choices Use utils as a measure of utility, assigning a specific number to T-shirts and movies, and then add those together. For a given combination of T-shirts and movies, survey a group of individuals to determine an average for utils to be assigned to the number of T-shirts and movies. For a given combination of T-shirts and movies, assign a number of utils to that combination. For a given combination of T-shirts and movies, use Google to identify the number of utils associated with the number of T-shirts and movies and then sum them.
- When trying to assess differences in her customers, Claire—the owner of Claire’s Rose Boutique—noticed a difference between the typical demand of her female versus her male customers. In particular, she found her female customers to be more price sensitive in general. After conducting some sales analysis, she determined that her female customers have the following demand curve for roses: QF = 24 − 2P. Here, QF is the quantity of roses demanded by a female customer and P is the price charged per rose. She determined that her male customers have the following demand curve for roses: QM = 27 − P. Here, QM is the quantity of roses demanded by a male customer. If two unaffiliated customers walk into her boutique, one male and one female, determine the demand curve for these two customers combined (i.e., what is their aggregate demand?).A researcher wants to study about the behaviours of postgraduate students in Australia in mobile phone usage. One of the goals of the study is to analyse whether there is a relationship between the amount of time they spend using the mobile phone and their gender. What are the two variables involved to achieve that goal?The goal of the consumer is to maximize the total utility or satisfaction derived from their purchase choices, given the unique budget constraint. To calculate total utility of a given combination of T-shirts and movies, one would use the following approach: Group of answer choices For a given combination of T-shirts and movies, assign a number of utils to that combination. For a given combination of T-shirts and movies, survey a group of individuals to determine an average for utils to be assigned to the number of T-shirts and movies. Use utils as a measure of utility, assigning a specific number to T-shirts and movies, and then add those together. For a given combination of T-shirts and movies, use Google to identify the number of utils associated with the number of T-shirts and movies and then sum them.
- Consider the experiment of a toss of two coins. A: observes one head.B: observes two heads. Find P(A) and P(B). Group of answer choices P(A) = 0.1 and P(B) = 0.2 P(A) = 0.25 and P(B) = 0.25 P(A) = 0.5 and P(B) = 0.25 P(A) = 0.25 and P(B) = 0.5 P(A) = 0.5 and P(B) = 0.5There are two shows on Netflix that Jeff can watch, Show 1 and Show 2. x₁ measures the number of episodes watched of Show 1 and x₂ measures the number of episodes watched of Show 2. Jeff's preferences can be represented by u(x₁, x₂) = x² + ax². Jeff has 11 hours available for watching Netflix today. Each episode of Show 1 lasts 30 minutes, while each episode of Show 2 lasts one hour. For all question parts, round to three decimal places if necessary. For parts (a) - (f), let a = 1. Draw Jeff's indifference curves for the utility levels u = 4, 9, 16. Draw a straight line between the bundles (x₁, x₂) = (4, 0) and (x₁, x2) = (0, 4). Now, use your picture to determine whether the following two statements are true or false. Answer "1" for true. Answer "0" for false. a) Statement 1: Jeff's preferences are strongly monotone. 1 b) Statement 2: Jeff's preferences are strictly convex. 0 c) Find the bundle at which one of Jeff's indifference curves is tangent to the budget line. (x₁, x^2) = ( d)…Suppose X = R k + for some k ≥ 2, and we define x = (x1 , …, xk ) ≥ = (y1 , …, yk ) if x ≥ y; that is, if for each i = 1, …, k, xi ≥ yi . (This is known as the Pareto ordering on R k + ; it plays an important role in the context of social choice theory in Chapter 8.) (a) Show that ≥ is transitive but not complete. (b) Characterize ≥ Is asymmetric? Is≥ Negatively transitive? Prove your assertions. (c) Characterize ~ defined from ≥ in the usual fashion; that is, x ~ y if x ≥ y and y x. Is ~ reflexive? Symmetric? Transitive? Prove your assertions.
- Questions: A university is trying to raise funds to build a state of arts auditorium. Total cost to build the auditorium will be $5 million. The university has identified two possible donors for the project. Let S1 and S2 denote the donations of Donor 1 and 2, respectively. Question 1: Donor 1's utility from donating S1 is (1/2) (S1 + S2) - S1. Donor 2's utility from donating S2 is (1/4) (S1+S2) - S2. The two donors simultaneously decide how much to donate (or equivalently, Donor 1 does not know Donor 2's donation amount, while deciding how much to donate, and vice-versa.) 1. lot the Best Response functions of the Donors. Plot S1 along the x - axis and plot S2 along the y - axis. Properly label your diagram. 2. Find out the Nash equilibrium amount of donations for each donor. If there are multiple Nash equilibria, find out all of them. Justify your answer. Question 2: Now, suppose that the university identifies a third donor. Donor 3 will donate $3 million if S1 + S2 at least $2…There are two shows on Netflix that Jeff can watch, Show 1 and Show 2. x₁ measures the number of episodes watched of Show 1 and x2 measures the number of episodes watched of Show 2. Jeff's preferences can be represented by u(x₁, x₂) = x² + ax². Jeff has 5 hours available for watching Netflix today. Each episode of Show 1 lasts 30 minutes, while each episode of Show 2 lasts one hour. For all question parts, round to three decimal places if necessary.An experiment is conducted to a consumer named Kim to see her preferences between 3 (three) goods of x1, x2, and x3, with their respective prices of p1,p2,p3. The experiment reveals the following results: If P^0= (p1,p2,p3) = (1,2,3) --> the consumer %3D chooses bundle = (3,2,1) p^1 = (p1,p2,p3) = (2,1,2) --> the consumer chooses bundle = (2,2,1) P^2= (p1,p2,p3) = (3,5,1) --> the consumer chooses bundle = = (1,2,1) %3D a) From the given results, define Kim's preference relations (using the relevant preference symbols between bundle A and B, B and C, C and A! b) Explain whether Kim's preference is consistent with the utility-maximizing theory and rationality in economics, elaborate why!