Chapter 1 1, The preferred design would be a between design. In principle, a within design is would be better. However, in this case communication can have a tasting effect on the price level. Asa consequence, the treatments are not distinct. 2. The answers would be underestimated. The main cause of the bias would be the endowment effect 3. The five additional rankings are: DQDQ, DQQD. QDDQ. QDD, QQDD 4, There are 6 sessions with two treatments each, and we are not concerned about order. Hence, the number of possible rankings 80. Chapter 2 1. (@) Qey € [4,5], Peg =6 (©) Quy = 3. Poy € (7.8) Hearts 8 Spades Hews [6 6 [0,0 Spades [00 [R 8 Chapter 8 1. The equilibrium quantity is Qog =4. Thus, if a seller inereases the price, the other seller is able to send 3 units ata price of Puy =7. The seller that raises the price to P” = 8 can sell only I unit and ‘obtains a benefit of x’ = 8 —3 = 5. If the seller chooses the equilibrium price, she could sell 2 units obtaining a benefit of x=7.47~3—4=7.4. The maximum possible price is V = 6. If the price of seller iis lower than seller j’s price, then seller {can sell 5 units, while seller j can only sell 1 unit, Thus, the expected earings are F(p)p + (1 — F(p))5P \, which solving for F(p) gives: r= o Because F (p) is a cumulative density, F (p) < [0.1]. This implies that the randomization range is given by p € $,6. Moreover, the Edgeworth cycle also takes place in the range defined by these prices. Chapter 11 1. @ Theexpected value is BV = {Pr(1)1 4Pr(3)3}(15) = {0.5(1) +0.5(3)} (15) = 215) =USD30. © The expected value of the asset dectines on average by USD 2 in each period. ¢ The maximum value is USD 45. ‘* The minimum value is USD 15.