Question
Person A, Person B and Person C own stock in the same company. All of them are loss averse and have the same value function:
Person A, Person B and Person C own stock in the same company. All of them are loss averse and have the same value function: v(x) = x for gains and v(x) = 2x for losses. The stock's price is shown below
October = 100
November = 90
December = 110
January = 70
February = 50
March = 80
Q1) Person C bought the stock in January. They expect to derive a value of at least +5 in April as compared to their reference point of 80. What is the minimum price that the stock will need to have in March to fulfill C's expectations?
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Microeconomics
Authors: Robert Pindyck, Daniel Rubinfeld
8th edition
978-0132870436, 132870436, 013285712X, 978-0133371178, 133371174, 978-0132857123
