Econ 455 Behavioral Economics

Hello Students, welcome to our discussions sections site.
Here you will be able to find solutions to the quizzes as well as solutions to the handouts.
Remember, studying behavioral is about:

1.  Upgrading our standard models to get closer with reality
2. The Last Mile Problem
3. Free Lunches  

It is important to keep in mind the following:

• Office Hours: Thursdays, 12:30-2:30 P.M.

---

Limited Attention 

What is the curse of Education?
Does it holds when we have a Monopoly?
 What happens in the counterfeit model if we had an additional agent?




​

Handout 1

Expected Utility vs Prospect Theory
Most Econ models are based on Expected Utility.
What are the main assumptions of EU?
What are the main results?
What is Loss Aversion?
​Why reference points matter?
​

Handout 5

Intro Bounded Rationality
Now we will not assume a bias but some individuals have problems at the time they solve their utility problem. What happens if you forget at what stage of the game you are?
​

Handout 9

Present Bias, Self-Control

What do we need to know to infer the discount parameters? 
When is it the case that default seems reasonable in the standard model?What is backwards induction?

Handout 2

Quiz 1

Cumulative Prospect Theory
What are the steps to solve a CPTU problem?
Why is so important to consider the reference point?
​

Handout 6

Quiz 4

Bounded Rationality: Memory Issues
Why is it the case that on fairly competitive markets we observe price dispersion?
If we know that we have imperfect recall, how can we design a optimal exante strategy?

Handout 10

Self-Control and Beliefs

Why is it the case that the Long Run Self will only enforce the commitment action according to a cutoff rule?
Remember you want to understand Bayes updating if you want to avoid:
Base Rate Neglect, and Biased Processing
P(X|Y) is not the same as P(Y|X)

Handout 3

Quiz 2

Behavioral Game Theory
How do we solve dynamic games?
When do we use Bayesian Nash Equilibrium?
How can we incorporate Envy costs?
 

Handout 7

Quiz 5

Other Topics
Source Amnesia
Categorization

​

Handout 11

Confirmation Bias

What are the main difference between the Naive agent and the Sophisticated one.
Why is it so important to start unbiased?
What can we say about first impressions?
QUIZ comes from lecture notes

Handout 4

Cognitive Dissonance:
Why people once they made a choice try to justify their beliefs?
Why we see so many restaurants opening and closing on state street?
When we are overconfident should we find our ability level?
​

Handout 8