Asked by Cynthia Frias on Jul 26, 2024
Verified
In the classroom experiment where a mug is bought and sold,
A) acquiring the mug was perceived to be a greater "gain" for those who acquired it than the "loss" for those who gave it up.
B) giving up the mug was perceived to be a greater "loss" to those who had one than the "gain" from obtaining a mug for those without one.
C) the price at which the mug was exchanged compensated precisely the value gained and lost by the traders.
D) the price at which the mug could be sold was always less than the price at which the mug was acquired.
Classroom Experiment
An educational activity conducted within a classroom setting that allows students to observe and participate in a controlled scenario related to the subject matter.
"Loss"
The result of expenses exceeding revenues or costs outweighing benefits in a financial transaction or operation.
- Acquire knowledge of the experimental proofs backing concepts in behavioral economics, as demonstrated through classroom mug experiments.
Verified Answer
PS
PBRH SURAYA BINTI MISLANJul 27, 2024
Final Answer :
B
Explanation :
This is known as the "endowment effect," where people tend to place a higher value on things they already possess than on things they do not. Those who had the mug felt that giving it up would result in a greater loss than the gain experienced by those who did not have it. This leads to difficulty in reaching efficient market outcomes as people's valuations of goods and services are based on their personal attachment to them rather than objective value.
Learning Objectives
- Acquire knowledge of the experimental proofs backing concepts in behavioral economics, as demonstrated through classroom mug experiments.