This preview shows page 1. Sign up to view the full content.
Unformatted text preview: guishable and a prefe erence can be reporte ed. Anot ther potential problem arises whe choices a present to us in certain en are ted ways This is re s. eferred to a the "fram as ming problem m". Supp pose that yo are abou to buy a laptop for $ ou ut $1000 and a software program fo or $100 The sale clerk tells you that th software is on sale for $20 off at another 0. es s he e e f r branch of the st tore, which is a 20 min nute drive a away. The laptop is th same he e er price at the othe store. t ses...you are about to buy a lapto for o op Now, suppose the same situation aris $100 and a so 00 oftware prog gram for $100. The sa ales clerk te you tha the laptop ells at p 335 is 2% off at ano % other branch of the store, which is a 20 minu drive aw h s ute way. The softw ware is the same price at the othe store. s e er of ents that rep that the would dr port ey rive to the Interestingly, the fraction o responde other store is much higher for the $20 discount o the softw r m r 0 on ware than fo the 2% or 7 savin on the laptop. ngs This is the findin even tho ng ough the inconvenienc of travel and the sa ce avings to the e 8 cons sumer is the same in b e both cases. Okay but how does this le to a violation of the transitivity property? y, d ead e y ? , o nsumer's re esponse if t the Well, we would expect indifference to be the con sales sperson said that the s store was o of stock on both the laptop an the out e nd softw ware and the consume would have to go to the other s er store for bot goods th (rece eiving $20 savings on the purchase of the tw goods co s wo ombined). s the ual vity ty. If this were the case then t individu violates the transitiv propert To see this, denote Travel to the other store to get $2 off the so 20 oftware. X=T Y=T Travel to the other store to get 2% off the laptop. % Z = b both ite buy ems at the f first store. first two choices (comparing the savings wit the optio of buying from the th on g The f first s store) say that... t X Z and Z Y, b the last scenario (w but where we c cannot buy the goods from the first sto says th X ore) hat GRO OUP DECIS SION MAKIN NG ~ Y. What problems can arise in the conte of group decision m ext p making? Supp pose we ha a house ave ehold comp prised of 3 p people Sp panky, Alfal an...
View Full Document
This note was uploaded on 05/25/2010 for the course ECON 301 taught by Professor Sning during the Spring '10 term at University of Warsaw.
- Spring '10