Questions and Answers
What concept refers to the incorrect beliefs about the rationality of others in economic contexts?
Which type of data is observational and not designed by the researcher?
What term describes the phenomenon where individuals show preference for avoiding losses rather than acquiring equivalent gains?
Which concept relates to the tendency to prefer immediate rewards over larger, delayed gains?
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What is the primary focus of prospect theory in economics?
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What is a defining characteristic of bounded rationality in decision-making?
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What distinguishes a lab experiment from a natural field experiment?
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What type of field experiment involves subjects being unaware that they are in an experiment?
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Which of the following describes frame sensitivity in economic decision-making?
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Which of the following is NOT a type of time preference discussed in economic theory?
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What aspect of human behavior does behavioral economics primarily study?
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In the context of the two systems of thinking, what characterizes System 1?
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What does a heuristic refer to in decision-making?
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Which of the following is NOT an assumption of the standard economic model?
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What is a systematic error in decision-making known as?
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Which of the following statements best describes the role of framing in decision-making?
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According to the content, how does experimental economics primarily differ from traditional economics?
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What was noted as having some evidence for improving scores in decision-making tasks?
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What does the term 'moral dilemmas' signify in the context of experimental economics?
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What is indicated as a potential reason why replications of studies may not find strong effects?
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Study Notes
Introduction to Experimental Economics
- Course examines behavioral and experimental economics, emphasizing human decision-making beyond traditional economic theory.
- Behavioral economics integrates psychological insights to explain deviations from the "standard model."
- Experimental economics employs structured experiments to investigate economic hypotheses.
Cognitive Processing Systems
- System 1: Characterized by fast, intuitive responses.
- System 2: Involves slow, analytical thinking.
- Evidence suggests manipulating font difficulty may push individuals to utilize System 2, potentially improving performance (Alter et al., 2007).
Framing and Heuristics
- Identical outcomes (5 deaths vs. 1 death) can yield varied perceptions based on how scenarios are framed.
- Influential factors: framing, individual agency, fairness perceptions, and moral dilemmas (e.g., self-driving car ethics via the Moral Machine project).
- Heuristics serve as simple decision rules that may lead to biases contrary to standard economic predictions.
- Bias can arise from focusing on larger discounts, even if actual benefits are equivalent.
Standard Economic Model Assumptions
- Assumes individuals have correct beliefs about the world and their capabilities.
- Considers individuals as risk-averse, self-interested, and having infinite cognitive capacity.
- Predicts frame-insensitivity in decision-making.
Realistic Behavioral Economic Assumptions
- Acknowledges persistent incorrect beliefs (non-Bayesian updating) among individuals.
- Highlights limitations in assumptions regarding the rationality of others (behavioral game theory).
- Addresses non-standard risk preferences (prospect theory, loss aversion, ambiguity aversion).
- Recognizes social preferences and hyperbolic discounting affecting time-related decisions.
- Acknowledges bounded rationality, leading to heuristics and sensitivity to framing.
Types of Economic Data
- Naturally Occurring Data: Observational data from real-world settings without researcher intervention, includes natural experiments.
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Controlled Data:
- Natural field experiments: subjects unaware they're part of an experiment.
- Framed field experiments: subjects aware of their involvement, usually in familiar settings.
- Artefactual field experiments: laboratory-based, engaging subjects in familiar tasks (e.g., medical decision-making).
- Lab experiments involve controlled settings to test hypotheses directly.
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Description
Explore the fundamentals of behavioral and experimental economics in this introductory lecture for Econ 440. Professor Ragan Petrie discusses human behavior deviations from traditional economic theories and the impact of psychology on these fields. Discover how experimental methods are applied to economic questions to enhance understanding.
