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[Exercise 9A.1]- Suppose that in Example 9A.1 Eddie has an intermediate level of trading experience and therefore expects with a 75% chance to keep

 

[Exercise 9A.1]- Suppose that in Example 9A.1 Eddie has an intermediate level of trading experience and therefore expects with a 75% chance to keep his endowment and with a 25% chance to change his endowment. a) [10 pts] Determine his WTP (which may depend on B and \lambda). b) [10 pts] Determine his WTA (which may depend on B and \lambda). c) [5 pts] Does he exhibit an endowment effect (i.e., WTA/WTP > 1)? How does the ratio of WTA to WTP compare to the cases when he expects to keep his endowment with certainty and with only a 50% chance? Discuss this comparison

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