LEC 1 - BEHAVIOURAL AND EXPERIMENTAL ECONOMICS INTRO

Question 1

what is behavioural economics

Answer 1

Behavioral economics is about understanding economic behaviour and its consequences. It’s also about understanding whether people make good or bad choices, and could be helped to make better choices

Question 2

when would someone prefer the sure thing to the gamble, even though the gamble has a higher expected value? with a diagram

Answer 2

when the utility function is concave, implying that the individual is risk averse

Question 3

what does it mean if someone is risk averse

Answer 3

if, for any lottery, they prefer to receivethe expected value of that lottery forsure, than play the lottery

Question 4

how can control over preferences be achieved in a Laboratory experiment

Answer 4

randomisation, this ensures independence

Question 5

what are the 4 phases of an economic experiment

Answer 5

1. experimental design
2. pilot experiment
3. actual experiment
4. follow-up experiment

Question 6

what’s the benefits of using student subjects

Answer 6

convenient and low opportunity costs

Question 7

why use random lottery incentives

Answer 7

can avoid wealth effects.

subjects might be influenced by the amount of money they have won in previous rounds

Question 8

what does ceteris paribus mean

Answer 8

all other things equal

Question 9

show and describe the standard model

Answer 9