Ex 3 47 Suppose that you are loss averse and that your value function is...
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Ex 3 47 Suppose that you are loss averse and that your value function is v x x for gains and v x 3x for losses a Represent the value function graphically in the manner of Figure 3 11 b Represent your indifference curves graphically in the manner of Figure 3 13 b assuming that your initial endowment is 3 4 Bananas v x V 1 1 t v 1 igure 3 11 Value function 3 1 Bananas 3 2 1 1 2 3 a Without loss aversion 2 3 b With loss aversion Figure 3 13 Indifference curves and loss aversion Apples Apples
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