answers to practice problems

answers to practice problems - PPE 203/PSYC 265 BOUNDED...

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PPE 203/PSYC 265 BOUNDED WILLPOWER PRACTICE PROBLEMS 1) Matching : Next to each item below, place one letter of the concept that best matches and/or explains it. Letters could be used more than once or not at all. A. Present Bias B. Naïve Diversification C. Hot/Cold Empathy Gaps D. Temptation Goods E. Everything A through F F. Mental accounting _ B _ Investing in a lifestyle fund, but then other funds as well Lifestyle funds are intended to do actual diversification, but people undo that by buying a little of them and other things as well. _ C _ Heroin addicts valuing next week’s methadone dose twice as much shortly before this week’s dose as shortly after _ C _ Making poor choices when grocery shopping while hungry _ F _ A self-control attempt Mental accounting is the only one of these that people use to control their behavior. _ E _ Not accommodated by DU None of this stuff is DU. _ C _ Leads to violations of the stationarity of utility assumption Empathy gaps are a reason that instantaneous utility is not viewed the same from every period _ F _ It’s often prescriptive Mental accounting is the only one of these that might be the best thing for one to do given limitations of willpower 2) β-δ types matching : Next to each statement below, place one letter representing which two types for which the statement is true. If the statement isn’t true for two and only two types use option “none.” A. TCs and Naïfs B. TCs and Sophisticates C. Naïfs and Sophisticates D. None _ C _ They have the same preferences
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The naïve/sophisticated distinction refers only to whether the decision maker anticipates her lack of self-control. Otherwise, there is still a lack of self-control and wanting of the same things, just different plans. _ A _ They have the same strategies They both just pursue the best utility stream. _ A _ They are not interested in commitment devices TCs don’t need them and naïfs don’t know they need them. _ B
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answers to practice problems - PPE 203/PSYC 265 BOUNDED...

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