1 and sells her mug what is her reference point after τ periods have elapsed rs

# 1 and sells her mug what is her reference point after

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= 1 and sells her mug, what is her reference point after τ periods have elapsed r s τ ? 2. Suppose Bilal has no mug in period 0 and has r 0 = 0. Solve for y B , the maximum price he would pay for a mug, as a function of α . Explain ∂y B /∂γ . 3. Suppose Salma owns a mug in period 0 and has r 0 = 1. Solve for y S , the minimum price she would accept to sell her mug, as a function of α . 1 Not examinable, but for the curious: the probability that at least 2 people out of a group of n share a birthday is 1 - 365! 365 n (365 - n )! 1
EC 310 - Behavioural Economics 4. Solve for L = y S y B . Interpret the sign of ∂L/∂α . 5. Now suppose that it is a long time before period 0, and neither Bilal nor Salma have mugs. Now endow Salma with a mug. Both must commit now to a trade which will only be enacted in period 0. (a) Solve for y f B , the highest price that Bilal would commit now to paying for the mug in the future. Explain how it compares to y B from before. (b) Solve for y f S , the lowest price that Salma would commit now to selling the mug for in the future. Explain how it compares to y S from before. 2

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• Spring '20
• Economics, Period, Periodic function, Mug

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