Problem 1
Which of the following are systematic errors? a. A colorblind person who repeatedly runs red lights. b. An accountant whose occasional math errors are sometimes on the high side and sometimes on the low side. c. The tendency many people have to see faces in clouds. d. Miranda paying good money for a nice-looking apple that turns out to be rotten inside. e. Elvis always wanting to save more but then spending his whole paycheck, month after month.
Problem 2
Identify each statement as being associated with neoclassical economics or behavioral economics. a. People are eager and accurate calculators. b. People are often selfless and generous. c. People have no trouble resisting temptation. d. People place insufficient weight on future events and outcomes. e. People only treat others well if doing so will get them something they want.
Problem 3
Label each of the following behaviors with the correct bias or heuristic. a. Your uncle says that he knew all along that the stock market was going to crash in 2008 . b. When Fred does well at work, he credits his intelligence. When anything goes wrong, he blames his secretary. c. Ellen thinks that being struck dead by lightning is much more likely than dying from an accidental fall at home. d. The sales of a TV that is priced at \(999\)dollars rise after another very similar TV priced at \(1,300\)dollars is placed next to it at the store. e. The sales of a brand of toothpaste rise after new TV commercials announce that the brand "is preferred by 4 out of 5 dentists."
Problem 4
Erik wants to save more, but whenever a paycheck arrives, he ends up spending everything. One way to help him overcome this tendency would be to: a. Teach him about time inconsistency. b. Tell him that self-control problems are common. c. Have him engage in precommitments that will make it difficult for his future self to overspend.
Problem 5
Many proposers in the ultimatum game offer half to the responder with whom they are paired. This behavior could be motivated by (select as many as might apply): a. Fear that an unequal split might be rejected by a fairminded responder. b. A desire to induce the responder to reject the offer. c. A strong sense of fairness on the part of the proposers. d. Unrestrained greed on the part of the proposers.
