Goolsbee1e_Solutions_Manual_Ch17 - Behavioral and Experimental Economics 17 1 AJ pays full price to view Batman The 20 th Iteration at the multiplex

Goolsbee1e_Solutions_Manual_Ch17 - Behavioral and...

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Solution Solution 1. AJ pays full price to view Batman: The 20th Iterationat the multiplex. After three minutes of viewing, he realizes that the movie is worse than anything he could be watching on TV at home. Yet, he stays to the end, “… because I paid $9 for the ticket.” What behavioral bias has AJ fallen victim to? Explain. 2. Connor and Marie are in a relationship with one another, a relationship punctuated by constant bickering and mistrust. “Connor,” Marie’s friends tell her, “is a jerk. Why on earth don’t you leave him?” To which Marie responds, “Silly, we’ve been together for 9 years! I can’t just throw away those years!” Explain how Marie has fallen victim to the sunk cost bias. 3. Lots of people pay high fees to join a gym in early January, and then fail to work out more than a few times. Does this evidence provide support for or against the sunk cost bias? Explain your reasoning. 4. In a recent survey, two-thirds of respondents indicated that they were not saving enough for retirement. What behavioral bias can explain the willingness of individuals to knowingly underfund their future stan-dard of living? Explain.
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