EXAMINATION FOR INTERNAL STUDENTS
Behavioural Economics代考 Tom needs to decide when to write a report instead of going out with friends and uses a quasi-hyperbolic discount utility function.
MODULE CODE : ECON0040
ASSESSMENT: ECON0040A6UC/ECON0040A6UD
PATTERN
MODULE NAME : ECON0040 – Behavioural Economics
LEVEL: : Undergraduate
Controlled Condition Exam: 3 Hours exam
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Answer ALL questions from Part A and ONE question from Part B.
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PART A Behavioural Economics代考
Answer ALL questions from this section.
Tom needs to decide when to write a report instead of going out with friends and uses a quasi-hyperbolic discount utility function. There are three days 𝑡 ∈ {0, 1, 2} and Tom needs to pick one of these days to write the report and he goes out with friends in the remaining two since not writing the report at all is extremely costly. The instantaneous utility of going out with friends on day 0 is 4 utils, on day 1 is 5 utils, and on day 2 is 8 utils.
(a) Suppose Tom is time-consistent and prefers to write the report in period 2. What does this imply in terms of his patience level? Behavioural Economics代考
(b) Now suppose Tom has present biased preferences with 𝛽 = and 𝛿 = 1.
(i) When would a naïve Tom write the report? Explain.
(ii) When would a sophisticated Tom write the report? Explain.
(iii) What if a commitment device were available, would he use it if he is naïve?What if he is sophisticated, would he be willing to pay for this commitment device? When would Tom write the report?
(c) Compare your findings above. Explain intuitively whether you can make general conclusions comparing the behaviour of naïve, sophisticated or time-consistent individuals based on the timing of rewards and costs.
A2 Ana and Barbara have other regarding preferences over monetary payoffs; and, their preferences can be represented as follows:
(a) Interpret how the parameters 𝜎 and 𝜌 allow for different types of social preferences for Ana and Barbara. In particular, explain what their utility functions show about their pref erences if:
(i) 𝜎=𝜌=0;
(ii) 1>𝜎=𝜌>0;
(iii) 𝜌>0 >𝜎;
(iv) 𝜌>𝜎>0 and𝜎 < 1.
(b) Assume now that 𝜎 =and 𝜌 = 2. Ana and Barbara are each endowed with one unit of income. They decide simultaneously whether to contribute their whole one unit of income to the public good or keep it entirely for themselves. For each unit of income contributed to the public good, both players receive income Y=2 from the public good. Behavioural Economics代考
(i) Given Ana and Barbara’s preferences, is it a Nash Equilibrium for both players to contribute to the public good? Show and explain.
(ii) Given Ana and Barbara’s preferences, is it a Nash Equilibrium for both players not to contribute to the public good? Show and explain.
(iii) Consider now a sequential version of the public goods game where Ana acts first and Barbara observes Ana’s choice and then chooses to contribute or not (they still both have other regarding preferences). Explain what Ana should do.
(c) What are the reasons people donate to charitable causes, conduct unpaid voluntary work, or offer more than the standard equilibrium prediction of zero contribution in a typical dictator or ultimatum game? Do people enjoy being altruistic? Explain by using concepts you have learned in class and provide at least two specific examples. Please cite relevant literature in support of your arguments.
PART B Behavioural Economics代考
Answer ONE question from this section.
B1 Rao (2019) looks at generosity, discrimination and diversity in Delhi schools.
(a) What are the design characteristics of this study? Explain.
(b) What are the main outcomes of this study? How does the author exploit the natural experiment to measure relevant outcomes? Explain.
(c) What do you think are the main limitations of this study? Provide at least two arguments. (Note: Please make sure that at least one of the arguments has not already been discussed in class/article and is your own.)
B2 Falk and Kosfeld (2006) look at the hidden costs of control.
(a) How do the authors measure the hidden costs of control? What are the specific experimental procedures that allow the authors to measure costs of control?
(b) What are their predictions on participants’ behaviour according to the standard economic model, inequity aversion model and distrust aversion model?
(c) What are their main findings? Is there a hidden cost of control? Explain.
B3 Niederle and Vesterlund (2007), and Andersen et al. (2012) among others have looked at the relationship between education and gender. Behavioural Economics代考
(a) Why do scholars believe that studying this relation is interesting? What could be the potential behavioural and non-behavioural reasons of gender differences in major/career choices?
(b) Niederle and Vesterlund (2007) study whether women are less competitive than men with an experimental study. Explain their experimental procedure and results.Are their results indicative of a gender gap in competitiveness?
(c) Andersen et al. (2012) study whether women are born less competitive, or if they become less competitive as a result of the process of socialisation. Explain the findings shown in Figure 1.
Figure 1: Frequency of individuals who compete by culture, age group and gender