n this question, we study how the endowment effect model could accommodate the willing to sell and willingness to pay gap for a given object. Let M denote mug and C denote cash, so that bundles (M, C) represents different combination of mugs and cash. Given a reference point (rM , rC ), suppose that preferences of John over different bundles of mugs and cash can be represented by the following utility function: U(rM ,rC )(M, C) = M + C + v(M rM ) + v(C rC ) (1) where the function v(t) = t if t > 0 2t if t 0