Section+Notes+5[1]

Section+Notes+5[1] - Department of Economics University of...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Department of Economics University of California, Berkeley GSI: Josh Tasoff Spring 2010 Econ 119 Last Updated: 4/11/10 Section Notes 5 1 Agenda 1. Announcements 2. Questions? 3. Cheat Sheet for “Making It Up As We Go Along” 4. Practice Problems 2 Announcements 1. There was a mistake on the Section Notes 4 that I handed out in the last section. The pdf on bspace has the corrected version. 3 Cheat Sheet for “Making It Up As We Go Along” Below are a list of concepts that you should know, with the definition from the lecture notes. • Narrow Bracketing : focusing on a single decision independently of other concurrent deci- sions. – Example: Would you like to take a 50-50 gamble to win $6/lose $4? How about 100 such gambles? Would you take the gamble if you held risky assets that were equivalent to 100 such gambles? • Context Effects (or menu effects): irrelevant alternatives affect preferences. – Asymmetric Dominance : adding a strictly dominat ed option makes the strictly domi- nat ing option more desirable. Example: Vanilla Ice Cream or Chocolate Cake; tough choice. Vanilla Ice Cream, Melted Garlic Ice Cream, 1 Chocolate Cake; the melted garlic ice cream makes the vanilla look better. 1 You can try soft serve garlic ice cream at the Gilroy Garlic Festival. It is as good as it sounds. 1 Department of Economics University of California, Berkeley GSI: Josh Tasoff Spring 2010 Econ 119 Last Updated: 4/11/10 – Choice Overload : too many choices causes people to choose the default. Example: more 401(k) options, the more likely one chooses the default. – Compromise Effect : people go for the middle choice. Example: choose a wine from the menu, (2008 Cabernet for $20, 2001 Pinot Noir for $50) vs. (2005 Cabernet for $20, 2001 Pinot Noir for $50, 1994 Extra Snooty Bordeaux for $100). The extra snooty bordeaux increases purchases of the 2001 pinot noir. • Coherent Arbitrariness : people do not know their WTP/WTA for novel goods that they have little experience with. However their preferences are coherent in the sense that more increases WTP if WTP>0 and decreases WTP if WTP<0....
View Full Document

This note was uploaded on 09/02/2010 for the course ECON 119 taught by Professor K during the Spring '08 term at Berkeley.

Page1 / 5

Section+Notes+5[1] - Department of Economics University of...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online