This question asks you to think about an experiment related to the endowment-eect experiments discussed in class. Knetsch (1989) ran an experiment in which he gave a randomly selected half of his subjects mugs, and the other half of his subjects pens. After subjects looked at both items, he oered to exchange each mug for a pen plus 5 cents, and each pen for a mug plus 5 cents. Only 12% of those who originally received a mug, and 10% of those who originally received a pen, chose to exchange it for the other item plus 5 cents.

a) What would the neoclassical economic model predict should be the outcome of this experiment? Explain in words.