Economics 1st Edition by Dean Karlan,Jonathan Morduch

Exercise 4

Suppose your art history professor has a small personal art collection, including some works by a famous artist. She bought this artist's paintings at a modest price, before he became well known. One of the paintings is now worth $2 million. When you ask the professor whether she would buy it now for $2 million, she says she wouldn't. Is the professor's decision making consistent? Why or why not?