When students in a large class were surveyed about how much they would be willing to pay for a coffee mug with their university's logo on it, their medium willingness to pay was $5. At random, half of the students in this class were then given such a coffee mug, and each of the remaining students were given $5 in cash. Students who got mugs were then offered an opportunity to sell them to students who had not gotten one. According to standard economic models, how many mugs would be expected to change hands? How, if at all, would a behavioral economist's predication differ?

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Business

Jolly

8 September, 09:31

When students in a large class were surveyed about how much they would be willing to pay for a coffee mug with their university's logo on it, their medium willingness to pay was $5. At random, half of the students in this class were then given such a coffee mug, and each of the remaining students were given $5 in cash. Students who got mugs were then offered an opportunity to sell them to students who had not gotten one. According to standard economic models, how many mugs would be expected to change hands? How, if at all, would a behavioral economist's predication differ?

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Susie Q · Answer 1

1). How about we explain the standard financial model previously dependent on normal desire.

Since the medium ability to pay is $5, we can accept a large portion of the individuals have more readiness to pay than $5 and a large portion of the individuals have less. (Since it's a huge class, we can expect this)

In this way, half of them who got the mug will sell, as per standard hypothesis.

2). Presently conduct business analyst will oppose this idea. Individuals who got the mug, get an enthusiastic and nostalgic connection with it, in this manner they might not want to sell it since they get utility in the wake of having something, so by social hypothesis, not exactly 50% of students who got the mug will sell.