Tag Archives: mugs

What is the reference point of a non-owner of a mug? Give both r1 and r2. Solve for the “buying price”, the maximum price at which a non-owner is willing to buy a mug.

2. This question asks you to think about the mug experiments discussed in class in terms of actual utility functions. Let two dimensions of choice be mugs and money, with mugs being dimension 1 and money being dimension 2. Denote outcomes in mugs and moneyby c1 and c2, respectively, and reference points in the two […]