# Question: Suppose the messiness of apartments is measured on a scale

Suppose the messiness of apartments is measured on a scale from 0 to 100, with 0 the cleanest and 100 the messiest. Suppose also that the distribution of apartments by messiness is as shown in the diagram. That is, suppose 10 percent of the apartments lie between 0 and 20, 20 percent between 20 and 40, and so on.

Suppose, finally, that all parents tried to teach their children never to let any-one in to see their apartments if they were over 80 on the messiness scale. If such a rule of thumb were widely observed, what would be your best estimate of the messiness index of someone who said, “You can’t come in now, my place is a pit”? In a world in which everyone makes use of all available information, would you expect this rule of thumb to be stable? What do you conclude from the fact that people really do sometimes refuse admission on the grounds that their apartments are toomessy?

Suppose, finally, that all parents tried to teach their children never to let any-one in to see their apartments if they were over 80 on the messiness scale. If such a rule of thumb were widely observed, what would be your best estimate of the messiness index of someone who said, “You can’t come in now, my place is a pit”? In a world in which everyone makes use of all available information, would you expect this rule of thumb to be stable? What do you conclude from the fact that people really do sometimes refuse admission on the grounds that their apartments are toomessy?

**View Solution:**## Answer to relevant Questions

Explain in detail what will happen to an insurance company that charges teen-age males the same rates for automobile insurance as it charges its other customers.Suppose you have $10,000 to invest. A broker phones you with some information you requested on certain junk bonds. If the company issuing the bonds posts a profit this year, it will pay you a 40 percent interest rate on the ...There are two groups, each with a utility function given by U(M) = √M, where M = 144 is the initial wealth level for every individual. Each member of faces a loss of 44 with probability 0.5. Each member of group 2 faces ...Suppose you are the economic advisor for a firm that is trying to decide whether to acquire Bumbler Oil Company, whose only asset is an oil field that has a net value X under its current management. The owners of Bumbler ...Suppose your happiness is given by a Kahneman-Tversky value function like the one shown in the diagram.You have decided to put the most favorable spin on the various combinations of events that occur in your life. For each ...Post your question