Quiz 6
You have 20 minutes to answer the following questions.
1. Which of the following concepts of equilibrium in game theory is most robust in experiments
(i.e. most accurately describes relevant empirical data)
(A) dominant strategy equilibrium;
(B) it
Quiz 5
You have 15 minutes to answer the following questions.
1. The prospect theory accommodates
(A) risk loving behavior over moderate losses;
(B) loss aversion;
(C) accommodates buying lottery tickets together with expensive product insurance;
(D) all
Quiz 3
You have 20 minutes to answer the following questions.
1. Ann prefers to commit today to do a project tomorrow rather than to decide tomorrow. Her
preference for commitment can be explained by
(A) discounted utility model;
(B) hyperbolic discountin
Quiz 2
You have 20 minutes to answer the following questions.
1. Ann prefers an improving sequence of annual wages 25K, 30K, 35K to the decreasing sequence
35K, 30K, 25K. Her behavior can be explained by
(A) discounted utility model with positive discount
Quiz #1 Answers, Econ 115 Fall 2009
This solution guide was written by Andy C. Chang. Any remaining errors are
my responsibility. Please direct any corrections to achang19@uci.edu
1)
Under the discounted utility model, Ann will try to maximize her utility
Quiz
The objective of this quiz is to help you evaluate your progress, and to provide a starting point
for further discussion. This quiz will not aect your grade, and your answers need not be submitted.
You have 15 minutes.
1. Ann maximizes discounted uti
NBER WORKING PAPER SERIES
PSYCHOLOGY AND ECONOMICS:
EVIDENCE FROM THE FIELD
Stefano DellaVigna
Working Paper 13420
http:/www.nber.org/papers/w13420
NATIONAL BUREAU OF ECONOMIC RESEARCH
1050 Massachusetts Avenue
Cambridge, MA 02138
September 2007
I would l
Midterm 1
You have 50 minutes to answer 35 questions.
1. Ann prefers x to y , and y to z . Then the function u(x) = 3, u(y ) = 1, u(z ) = 10000 is her
(A) experienced utility; (B) decision utility; (C) anticipatory utility; (D) real-time utility.
Answer:
Second Midterm, Behavioral Economics 115
You have 50 minutes to 30 multiple choice questions. Good luck.
1. The empirical evidence in the dictator games shows that people are typically willing to share
about $2 out of a $10 endowment. This behavior can be
Final Exam
Wed, Dec 11, 4-6pm
multiple choice , 50-55 questions, two hours, less time
pressure
bring your own scantron F-288-PAR-L
two pages of handwritten notes
no cooperation!
office hours: Tue 12-1:30 SSPA 3177
please, submit your electronic eva
What happens in experiments?
Dominant strategies are robust.
In simple games, subjects pick the dominant strategy more
90% of the time.
One problem is fairness concerns, such as in the dictator
games.
What happens in experiments?
Iterated dominant strateg
Standard Economic Model: Game Theory
Game theory is a tool for studying strategic behavior of
several players.
The behavior of each player in a game should take into
account the behavior of others and the mutual recognition
of this interdependence.
Applic
Standard Economic Model: Game Theory
Game theory is a tool for studying strategic behavior of
several players.
The behavior of each player in a game should take into
account the behavior of others and the mutual recognition
of this interdependence.
Applic
Standard Economic Model: Game Theory
Game theory is a tool for studying strategic behavior of
several players.
The behavior of each player in a game should take into
account the behavior of others and the mutual recognition
of this interdependence.
Applic
Question 1
Prospect theory has the following features
Loss aversion.
v(-x) < - v(x) where x>0
diminishing sensitivity for gains and for losses. It implies
risk aversion for gains and risk loving for losses.
overweighing small probabilities and underwei
Prospect Theory
BEM: Kahneman and Tversky (79) proposed the prospect theory
The simplest form of this theory applies to prospects written as
(x, p; y, q)
that deliver a gain x> 0 with probability p and a loss y<0 with
probability q. With the remaining pro
Question 1
For some events, neither symmetry nor frequencies can
be used to compute probabilities.
Example: How likely is it that Lakers win the next title?
Also many people do not understand probabilities
(especially small ones) very well.
It seems that
Expected Value and Expected Utility
Expected Utility:
Suppose that an action f delivers several monetary payoffs x1, x2, .,
xn with probabilities p1, p2 , . pn respectively.
Then the expected value is
EV(f) = p1 x1 + p2 x2 + pn xn
And expected utility is
Midterm Exam
answer key and grades will be posted tomorrow
you can pick up your scantron and discuss solutions at
my office hours
average was 23.5 out of 34 (one question dropped)
85% - cutoff for solid A
70-75% -cutoff for solid B
60-65% -cutoff for s
Midterm Exam
multiple choice (35-40) questions, 50 minutes
bring your own scantron F-288-PAR-L
one page of handwritten notes, two sides, not larger
than the usual letter-size printer paper
no cooperation! Make your own mistakes. If two
students make i
Question 1
People will prefer to commit if
their future choices are time-inconsistent
they are aware of that
Therefore Hyperbolic (or quasi-hyperbolic) discounting
model with sophistication can explain commitments, but
DUM or Hyperbolic DUM with naivete
Fairness and Social Preferences
What do people care about?
others welfare (charitable giving)
fairness and inequality (pricing, entitlements, reference
transactions, games)
intentions
social and religious norms
Fairness and Inequality in Experiments
D
Standard Economic Models
utility maximization
delayed payoffs are discounted in a time-consistent
fashion (DUM)
utility depends only on the personal consumption
Stigler 81: when self-interest and ethical values with wide
verbal allegiance are in confli
BEM: Hyperbolic Discounting
This model has the form
U(c0, c1, ct) = t = 0, 1, t D(t) u(ct)
where D(t) is called the discount function.
D(t+1)/D(t) describes discounting between periods t+1
and t.
In the DUM, D(t) = t and D(t+1)/D(t) = = 1/(1+)
Hyperbolic
Three Layers of Economic Models
1. The top layer Standard Economic Models (utility
maximization, DUM). These models are tractable in
applications and allow easy computations.
2. The bottom layer data. Laboratory and natural
experiments.
3. The medium laye
Homework and Discussions
Discussions start next week.
You can attend any discussion, or more than one if you
like. (I ll post the entire schedule).
Some questions (especially cases) do not have clear cut
answers.
Therefore, you should attempt to augment T
Midterm Exams
First Midterm: October 26
Second Midterm: November 16
Each weighs 30%
Multiple Choice Only (30-40 questions)
First homework will be assigned today.
Most general SEM: Utility Maximization
People make choices that maximize their utility.
Utili
Add/Drop Cards
I cannot add people to a full class.
That is a department policy.
Keep trying to register electronically.
No drop after two weeks.
Standard vs Behavioral Economic
Models (SEM vs BEM)
SEM describes how agents should behave.
Behavioral Econom