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Suppose in an experiment, you randomly hand out a chocolate to half of the subjects in a large group. You then allow the subjects
Suppose in an experiment, you randomly hand out a chocolate to half of the subjects in a large group. You then allow the subjects to trade the chocolate. That is, the ones who own the chocolate can sell theirs, and the ones who do not own the chocolate can buy from the others. The chocolates can be sold at any price the buyer and the seller agree upon, irrespective of the price in the shop. 2. (8 points) Suppose that a subject, who received a chocolate in the exper- iment, has the following value function for chocolate and for money: [ x 0 v(x) = = -2- -x x < 0 What is the minimum price she is willing to accept to sell her chocolate? (8 points) Suppose that a subject, who did not receive a chocolate in the experiment, has the same value function for chocolate and for money: v(x) = = {x x 0 -2-x x < 0 What is the maximum price she is willing to pay to buy a chocolate?
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