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Behavioral Economics Final

Terms in this set (43)

Select all answers that are an example of a task attribute specific to system 1
Answer 2+2=
Drive a car on an empty road
System 2 uses instinct and intuition
False
System 1 operated automatically and quickly
True
System 2 is lazy and indecisive
True
Which of the following is not a factor that helps cause cognitive ease
Feels Effortless
Select all answers that is an example of a task attribute to system 2
Focus your attention on the clowns in a circus
Compare two washing machines for overall value
Give an example of the priming effect from the association of ideas
When someone asks you a hard question to answer so you respond to an easier question instead
Describe what children had to do in Mischel's Marshmallow test
Wait to eat the first marshmallow so they could get a second
System 1 involves effortful mental activities
False
What is wrong with these statements:
All roses are flowers
Some flowers fade quickly
Therefore some roses fade quickly
It's illogical, roses are among the flowers that do not fade quickly
Evidence from lottery winners shows that while some are less happy after about 5 years, most enjoy their new lottery income for many years
False
A Hedonic Treadmill refers to the idea that
Changes in income do not change a persons level of happiness in the long run
At what level of yearly household income does additional income have littler or no impact on happiness level
$75,000 per year
What paradox finds that as income increased over the last few decades, happiness has remained unchanged
Income-Happiness Paradox
Evidence from lottery winners shows that about 70% of all winnings are gone after 5 years
True
Based on the aspirations theory of Richard Easterlin, suppose an individual is at point B, $200 will move them to
Point A
Briefly define Duration Neglect
The length of time of an event has little impact on our memory of the events pleasure/pain
In the graph below, what does line A measure
Mean happiness
Regression to the mean may help explain the success of value investing
True
Since we don't know the correct prices for assets, the Efficient Market Hypothesis cannot be directly tested
True
Briefly define the efficient market hypothesis
Asset prices will trade for their true intrinsic value, meaning prices are "right" and the market cannot be beat over a long period
Give two examples of famous market bubbles
1929 stock crash and great depression
Japans stock bubble in 1989
In the guess two-thirds the average game, which of the following guesses would not be reasonable
66
According to the Efficient Market Hypothesis, asset markets can be beat because of so called "noise traders"
False
To win the beauty contest, what did someones 6 picks have to accomplish
They had to be the closest to the 6 most commonly selected by all other participants
The figure below shows data about participants playing what game
The two-thirds game
In the version of Deal or No Deal we reviewed in class, the Bank offers in the final rounds are usually over 100% of the expected value of the remaining offers
False
If the last two cases left in the game Deal of No Deal are valued at $100,000 and $50,000, what is the expected value of these remaining two cases
$75,000
In the example given of contestant Frank, what choices did he face when only 5 cases were left in the game Deal or No Deal, and what ended up happening to him
The bank offer was 75% of expected value and he turned it down. The only remaining large value was removed the next round. He left with only $10
What is Miljoenenjacht
Dutch version of deal or no deal
When the decisions presented to people are dependent on previous decisions or experiences, this is known as what kind of bias
Path Dependence
About how often did players in the game Split-or-Steal end up cooperating by both choosing to split
About 1/2 the time
In the game Split-or-Steal, the Nash Equilibrium is for both players to choose split
False
In the clip of Split-or-Steal from class, what happened
The girl chose to steal and ended up walking away with all the money
Which of the following best describes the evidence from studies over the game Split-or-Steal
Cooperation rates fell as the prizes got larger relative to the size of the prizes typically offered by the show
Explain in your own words what it means to "lie by ommision"
Instead of saying a direct lie like "I promise to split the money with you" you say something true and indirect like "my family would be really mad at me if i stole"
In the NFL draft, a team can trade picks with another team as long as both teams agree to the trade and all of the draft pucks occur in that draft year
False
What information is needed to calculate the true market value of a draft pick
Expected Performance
Salary Compensation
What bias involves people jumping too easily to thinking a person is a rare, superstar talent
Extreme Forecasts
Which of the following is NOT true about the 2012 draft trade between the Washington Redskins and the St. Louis Rams
Washington gave up their second pick in 2012, first pick in 2013, and their first and second picks in 2014
What bias involves people believing they have a special ability to discriminate talent levels above others
Overconfidence
One irony from the 2012 trade between St. Louis and Washington is that excellent player Russel Wilson was a third round pick
True
What would be different about the chart below if the market for NFL players was efficient
The lines on the chart would be identical
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