International Climate Negotiations Challenges

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Questions and Answers

What is a key challenge in greenhouse gas negotiations?

The high cost of implementing climate change prevention measures

Countries' unwillingness to adopt renewable energy sources

The lack of scientific consensus on climate change

Differing perceptions of fairness among countries (correct)

Why are countries more sensitive to potential economic losses from reducing emissions than to potential gains from preventing climate change?

Due to loss aversion (correct)

Because they are more focused on short-term gains

As a result of self-serving beliefs about fairness

Because they are unaware of the consequences of climate change

What is the primary goal of default options in green energy programs?

To provide financial incentives for adopting green energy

To increase the adoption of renewable energy sources without drastic changes in behavior (correct)

To educate people about the benefits of climate change prevention

To require people to adopt renewable energy sources

What is a key advantage of default options in green energy programs?

They can increase the adoption of renewable energy sources without requiring drastic changes in behavior Signup and view all the answers

Why do countries perceive fairness differently in the context of greenhouse gas negotiations?

Due to self-serving beliefs about fairness Signup and view all the answers

What is the purpose of behavioral interventions in the context of climate change prevention?

To encourage people to adopt green energy through cheap and easily implementable measures Signup and view all the answers

What is the primary reason why people use available information to help make a decision?

They are uncertain about their own preferences Signup and view all the answers

What is the consequence of using available information to make a decision?

It leads to deviations from standard predictions about choices Signup and view all the answers

What is the concept that describes how adding an alternative can influence preference for other alternatives?

Context dependence Signup and view all the answers

What is an example of asymmetric dominance?

A is better than B on one attribute, and B is better than A on another attribute Signup and view all the answers

What is the goal of exploiting context dependence in marketing?

To increase the share of a product Signup and view all the answers

What is the decoy effect?

The effect of adding an inferior option to increase sales of a target product Signup and view all the answers

What is the consequence of adding an option that is inferior to the target product and asymmetrically dominated by a competitor?

It increases sales of the target product Signup and view all the answers

According to Slovic (1995), what do people do when they are uncertain about their own preferences and need to make a decision?

They use available information to help resolve the uncertainty Signup and view all the answers

What is the primary purpose of 'choice architecture' in the context of behavioral economics?

To nudge people towards optimal behaviors Signup and view all the answers

What is the main difference between the traditional approach and behavioral economics in predicting how defaults influence choice?

The traditional approach assumes people's choices depict their true preferences, while behavioral economics assumes choices are influenced by presentation Signup and view all the answers

What is the primary reason why people in the US are less likely to grant access to their organs for donation compared to people in Sweden?

The default option in the US is to not grant access, while in Sweden it is to grant access Signup and view all the answers

What is the main characteristic of a 'nudge' in the context of behavioral economics?

It is an easy and cheap intervention that alters people's behavior in a predictable way Signup and view all the answers

What is the concept that describes how people overestimate how much their future taste will resemble their current taste?

Resemblance bias Signup and view all the answers

What is the primary goal of using behavioral insights in public policy?

To incorporate behavioral insights into public policy Signup and view all the answers

Why do people often mispredict their future taste?

Due to the resemblance bias Signup and view all the answers

What is the main difference between the US and Sweden in terms of organ donation rates?

The US has a lower donation rate, while Sweden has a higher approval rate Signup and view all the answers

What is a key characteristic of the SE mode in the evaluability hypothesis?

Options are evaluated separately Signup and view all the answers

What is the main implication of the JE/SE research on economic theory?

Fundamental value in economic theory is challenged Signup and view all the answers

What is the term used to describe the phenomenon where absolute valuations are arbitrary and sensitive to influences?

Coherent arbitrariness Signup and view all the answers

What happens to the initial arbitrary valuation in the coherent arbitrariness phenomenon?

It serves as an anchor and influences subsequent relative valuations Signup and view all the answers

What is true about attributes in the JE mode?

Attributes gain meaning in respect to each other Signup and view all the answers

What is the main difference between JE and SE modes?

JE mode evaluates options comparatively, while SE mode evaluates options separately Signup and view all the answers

What is the result of normatively irrelevant factors influencing valuation?

Valuations are influenced arbitrarily Signup and view all the answers

What is the implication of coherent arbitrariness on economic theory?

Valuations are arbitrary and require careful consideration Signup and view all the answers

What is the key difference between risk and uncertainty?

Risk involves known probability distributions, while uncertainty involves unknown probability distributions Signup and view all the answers

In the context of decision-making, what is the primary characteristic of ambiguity aversion?

A preference for risky outcomes over uncertain outcomes Signup and view all the answers

What is the main consequence of ambiguity on probability judgments?

Probability judgments add up to less than 1 Signup and view all the answers

What is the primary difference between Urn1 and Urn2 in the two urn problem?

The ratio of red to black balls in Urn1 Signup and view all the answers

What is the expected value of a bet on rolling 2 on a dice, if you stand to win 1000 Euros?

1/6 * 1000 Euros Signup and view all the answers

What is a common consequence of ambiguity aversion in decision-making?

Decreased willingness to act Signup and view all the answers

What is the primary characteristic of uncertain events?

The probability distribution is unknown Signup and view all the answers

What is the main implication of ambiguity aversion on decision-making?

It leads to more cautious decision-making Signup and view all the answers

Study Notes

Greenhouse Gas Negotiations

Self-serving beliefs about fairness can hinder negotiations as countries perceive fairness differently
Loss aversion: countries are more sensitive to potential economic losses than to potential gains from preventing climate change, making them reluctant to commit to significant emissions cuts

Remedies through Behavioral Interventions (Nudge)

Behavioral interventions can be used to increase adoption of renewable energy sources without requiring drastic changes in behavior or significant financial incentives
Default options: automatically enrolling people in green energy programs while allowing them to opt-out can significantly increase adoption
Constructed Preferences: people are uncertain about their own preferences and use available information to help resolve uncertainty, leading to deviations from standard predictions about choices and the influence of context in which options are presented

Behavioral Economics Concepts

Asymmetric dominance: when one option is better than another on one attribute but worse on another attribute, making it a tough choice
Context dependence: expanding the set of options can lead to preference shifts toward original set members
Decoy effect: adding an inferior option can lead to preference shifts toward the target option
Evaluability hypothesis: attributes that are difficult to judge can be influenced by other attributes that are meaningful
Preferences are reversed between joint evaluation (JE) and separate evaluation (SE) modes
Coherent arbitrariness: absolute valuations are arbitrary and sensitive to normative and non-normative influences, but relative valuations are coherent to the initial arbitrary valuation

Risk and Uncertainty

Risk: known probability distribution of an outcome (e.g., lottery numbers, roulette wheels)
Uncertainty: unknown probability distribution of an outcome (e.g., horse races, most things in life)
Ambiguity Aversion (AA): tendency to prefer risky over uncertain events
Ellsberg paradox: two urn problem where people prefer betting on events with known probability distributions over unknown probability distributions

Nudge

Any aspect of the choice architecture that alters people's behavior in a predictable way without forbidding any options or significantly changing their economic incentives
Easy to implement, cheap to implement, overt and not covert, no restriction on choice, and no forcing into any options
Examples of nudges include default options for organ donation and green energy programs

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Description

Explore the complexities of greenhouse gas negotiations, including self-serving beliefs about fairness and loss aversion, which hinder cooperative efforts to address climate change.