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(credit: clmper)

The largest anchor ever

How do we know what is a reasonable amount of money to pay?

How much would a rational person be prepared to pay for, say, a cauliflower? They’d go down the ranking of all possible purchases, and for each one compare the utility it provides with that offered by the vegetable, until the utilities are equal. Whatever price they’d pay for these equivalent goods, they’d hand over for the cauliflower.

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Source: “Coherent arbitrariness”: stable demand curves without stable preferences
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A steal at DM 5,000!

Written by

Accidental behavioural economist in search of wisdom. Uses insights from (behavioural) economics in organization development. On Twitter as @koenfucius

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