Suppose someone’s willingness to pay for a good is $10 and their reference point is $20....

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Suppose someone’s willingness to pay for a good is $10 and their reference point is $20....

Suppose someone’s willingness to pay for a good is $10 and their reference point is $20. If the good is $13 will they buy it? What does this tell us about sales and ‘bargain buys’?

business economics

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Answer 1

Answer #1

In terms of transaction utility this will be considered as a bad buy. The person is paying $13 for a good that he values at $ 10.

A good the person thought would cost $20 only costs $13. But, in terms of acquisition utility this looks a good deal. If the acquisition utility compensates the transaction utility the person may buy the good because ‘it is a bargain

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Answer 2

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