Exam 8: Behavioral Economics

Suppose Gina and Henry play two rounds of the ultimatum game.In the first round they play for $10;in the second round they play for $1,000.In the first round Gina suggests an 80/20 split ($8 to Gina,$2 to Henry),but Henry quickly rejects the offer as unfair.Assuming Gina is interested in gaining financially from the experience and that she understands behavioral economics,we would expect her to:

Results of the ultimatum game:

Anchoring:

A key difference between neoclassical economics and behavioral economics is that in behavioral economics context affects preferences.

Edgar and Felicity are players in an ultimatum game for $100,where Felicity is the proposer and Edgar is the responder.Suppose that Felicity proposes that she receive $95,while Edgar receives only $5.How would behavioral economists expect Edgar to respond?

Neoclassical economists generally believe which of the following about human behavior?

Alex was willing to pay $50 for the new World Cup soccer ball.When he received it as a gift,he was willing to sell it,but for no less than $80.According to behavioral economists:

Whenever Josh goes to his favorite restaurant,he wants to buy tiramisu,his favorite dessert.Despite the fact he would enjoy the flavor of the tiramisu the same amount every time,Josh only buys it when others are having dessert,and never buys it if he would be the only one having dessert.Behavioral economists would say that Josh's decision is affected by:

The threat of rejection in market transactions:

According to behavioral economics,placement of goods in retail stores is often designed to accomplish which of the following?

Heuristics generally help people make fewer errors in their decisions.

The self-serving bias causes people to act only in their self-interest.

Placement of goods in grocery and other retail stores is often done with the objective of encouraging impulse buying.

Last month Laura saw the value of her stock portfolio rise by $20,000.This month she saw the value of her portfolio decline by $20,000.According to behavioral economics:

The dictator and ultimatum games reveal that fairness and concern for others motivate people's behavior.

(Consider This)According to the piece "Wannamaker's Lament":

Because gun violence is portrayed frequently on television and in movies,people mistakenly assign too high of a probability that they will fall victim to gun violence,and too low of a probability to more likely but less publicized events.This phenomenon illustrates:

In developing prospect theory,which of the following did behavioral economists not discover about people's reaction to goods and bads?

Which of the following is the best example of a System 2 decision and action?

Which of the following best describes the relationship between market transactions and the ultimatum and dictator games?