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2: Reference Dependence Allan wants to buy a new shirt but has not done so yet. Suppose he has reference-dependent utility over shirts (cS) and
2: Reference Dependence Allan wants to buy a new shirt but has not done so yet. Suppose he has reference-dependent utility over shirts (cS) and money (cM) of the form: v(15cS 15rS) v(cM rM), where rM is Allan's reference point for money and rS is Allan's reference point for shirts. Utility is given byv(x)=x2 forx0andv(x)=2x2 forx<0. Allanhas$100incash. AssumethatwhenAllanis indifferent between buying and not buying a shirt, he buys a shirt. Note: utility is non-linear, so answers may not be round numbers
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