Say that 90 percent of the people in a market demonstrate the endowment effect and 10 percent

Question:

Say that 90 percent of the people in a market demonstrate the endowment effect and 10 percent are “rational.” Say that, initially, all people have equal wealth.

a. How would you expect the wealth distribution to change over time?

b. Would you expect the traditional model’s predictions, which are based on the assumption of rationality, to be correct? Why?

c. How might you determine the percentage of “rational”

people needed for the standard model to give accurate aggregate predictions?

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

Microeconomics

ISBN: 9781260507140

11th Edition

Authors: David Colander

Question Posted: