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Differences Between NeoClassical and Cognitive Behavioral Economics

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Differences Between NeoClassical and Cognitive Behavioral Economics

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Questions and Answers

What is the basis of Cognitive BE, according to the given text?

Integrating rationality into economic models

Market as the perfect allocative mechanism

Individualism and consequentialism

Herbert Simon's concept of bounded rationality (correct)

What are the two definitions of rational behavior, as per the text?

Adoption of means to achieve an objective and mathematical normative models

Substantial rationality and maximizing expected utility

Achievement of best possible result and selfishness

Procedural rationality and consistent time preferences (correct)

What is NET (Neoclassical Economic Theory) based on, according to the given text?

Selfishness

Maximization of Expected Utility

Bayesian probability operators

Substantial Rationality (correct)

Can the economic agent be rational if he takes a procedural behavior, according to the text?

Yes, even though the agent didn't try to optimize the results Signup and view all the answers

What does Satisficing behavior imply, according to the text?

Aspiration thresholds leading to explorative behavior Signup and view all the answers

What are the main assumptions of SEM (Standard Economic Models), as per the text?

Perfect rationality and Bayesian probability operators Signup and view all the answers

What is Loss aversion?

Giving more utility to losses than to gains Signup and view all the answers

What are the two anomalies that can be explained with Loss aversion?

Endowment effect and Status quo bias Signup and view all the answers

What is the Extremeness aversion?

Preferring moderate options over extreme ones Signup and view all the answers

What is the Preference reversal given the context?

A situation where preferences change based on context Signup and view all the answers

What is Assymetric dominance?

Preferring one option over another due to similarity Signup and view all the answers

What is the Similarity effect?

Preferring one option over another due to similarity to a third option Signup and view all the answers

What is Cooperative game?

A game where players cooperate for collective gains Signup and view all the answers

What is the difference in Nash Equilibrium of Prisoner's Dilemma in finitely repeated and infinitely repeated games?

In finitely repeated, defection is the only dominant strategy; in infinitely repeated, both players believe in cooperation with a small sigma probability Signup and view all the answers

What is Edgeworth model of social utility?

A model that focuses on psychological underpinnings of utility Signup and view all the answers

What is Simon’s Bounded Rationality?

A theory that emphasizes limitations on rational decision-making processes Signup and view all the answers