Business, 11.02.2021 22:50 chloeann5397

SolveSuppose Fox has reference-dependent preferences over money, stickers, and airplanes. Lethis consumption in money, stickers, and airplanes bec1,c2, andc3, respectively, and let hisreference points in money, stickers, and airplanes ber1,r2, andr3, respectively. Then, Fox’sutility is given byv(c1-r1) +v(4c2-4r2) +v(4c3-4r3),wherev(x) =xforx≥0, andv(x) = 2xforx <0. Normalize Fox’s initial amount of moneyto zero, and suppose he starts off with zero stickers and zero airplanes.1. What will be Fox’s utility from losing two stickers, gaining one airplane, and gaining$6?2. Fox arrives at the experiment, and it turns out that he receives an $8 show-up bonus, which he doesnotincorporate into his reference point for money. Suppose Fox is givena sticker (and he does incorporate this into his reference point). Calculate his sellingprice by (i) writing down his reference point; and (ii) solving for the pricepS

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SolveSuppose Fox has reference-dependent preferences over money, stickers, and airplanes. Lethis con...

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