A consumer is given the chance to buy a baseball card for $1, but hedeclines the trade. If the consumer is now given the baseball card, willhe be willing to sell it for $1? Standard consumer theory suggests yes, butbehavioral economists have found that “ownership” tends to increase thevalue of goods to consumers. That is, the consumer may hold out for someamount more than $1 (for example, $1.20) when selling the card, eventhough he was willing to pay only some amount less than $1 (for example,$0.88) when buying it. Behavioral economists call this phenomenon the“endowment effect.” John List investigated the endowment effect in a randomized experiment involving sports memorabilia traders at a sports-card show. Traders were randomly given one of two sports collectibles, say good A or good B, that had approximately equal market value.1 Those receiving good A were then given the option of trading good A for good B with the experimenter; those receiving good B were given the option of trading good B for good A with the experimenter.a. i. Suppose that, absent any endowment effect, all the subjects prefergood A to good B. What fraction of the experiment’s subjectswould you expect to trade the good that they were given for theother good? (Hint: Because of random assignment of the two treatments,approximately 50% of the subjects received good A and50% received good B.)ii. Suppose that, absent any endowment effect, 50% of the subjectsprefer good A to good B, and the other 50% prefer good B togood A. What fraction of the subjects would you expect to tradethe good that they were given for the other good?iii. Suppose that, absent any endowment effect, X% of the subjectsprefer good A to good B, and the other (100 – X)% prefer goodB to good A. Show that you would expect 50% of the subjects totrade the good that they were given for the other good.
Correlation
Correlation defines a relationship between two independent variables. It tells the degree to which variables move in relation to each other. When two sets of data are related to each other, there is a correlation between them.
Linear Correlation
A correlation is used to determine the relationships between numerical and categorical variables. In other words, it is an indicator of how things are connected to one another. The correlation analysis is the study of how variables are related.
Regression Analysis
Regression analysis is a statistical method in which it estimates the relationship between a dependent variable and one or more independent variable. In simple terms dependent variable is called as outcome variable and independent variable is called as predictors. Regression analysis is one of the methods to find the trends in data. The independent variable used in Regression analysis is named Predictor variable. It offers data of an associated dependent variable regarding a particular outcome.
A consumer is given the chance to buy a baseball card for $1, but hedeclines the trade. If the consumer is now given the baseball card, willhe be willing to sell it for $1? Standard consumer theory suggests yes, butbehavioral economists have found that “ownership” tends to increase thevalue of goods to consumers. That is, the consumer may hold out for someamount more than $1 (for example, $1.20) when selling the card, eventhough he was willing to pay only some amount less than $1 (for example,$0.88) when buying it. Behavioral economists call this phenomenon the“endowment effect.” John List investigated the endowment effect in a randomized experiment involving sports memorabilia traders at a sports-card show. Traders were randomly given one of two sports collectibles, say good A or good B, that had approximately equal market value.1 Those receiving good A were then given the option of trading good A for good B with the experimenter; those receiving good B were given the option of trading good B for good A with the experimenter.a. i. Suppose that, absent any endowment effect, all the subjects prefergood A to good B. What fraction of the experiment’s subjectswould you expect to trade the good that they were given for theother good? (Hint: Because of random assignment of the two treatments,approximately 50% of the subjects received good A and50% received good B.)ii. Suppose that, absent any endowment effect, 50% of the subjectsprefer good A to good B, and the other 50% prefer good B togood A. What fraction of the subjects would you expect to tradethe good that they were given for the other good?iii. Suppose that, absent any endowment effect, X% of the subjectsprefer good A to good B, and the other (100 – X)% prefer goodB to good A. Show that you would expect 50% of the subjects totrade the good that they were given for the other good.
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 1 images
