Answered: According to the Koszegi-Rabin model,… | bartleby

Microeconomic Theory

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter8: Game Theory

Section: Chapter Questions

Problem 8.10P

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According to the Koszegi-Rabin model, people's reference points are determined by their recent
expectations about outcomes. Suppose that, for an endowment effect experiment, people's expec-
tations – and thus their reference points – sre formed prior to entering the lab. According to
the Koszegi-Rabin model, would we expect such people to exhibit a larger or smaller endow ment
effect than is predicted by the endowment effect model that we studied in class? Briefly explain
your answer.

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