Question 1

If a Proposer and a Responder are asked to split $100 in the ultimatum bargaining game, standard economic theory would predict that the Proposer should offer the Responder:
A)exactly $25.
B)exactly $50.
C)the largest dollar amount possible.
D)the smallest dollar amount possible.

Accepted Answer

The ultimatum bargaining game is a game in which the first player has the power to confront the second player with a take-it-or-leave-it offer. In this setting, the Responder should accept any amount offered by the Proposer, and the Proposer should offer the Responder the smallest dollar amount possible.

Question 2

In numerous experiments, researchers have found that if a Proposer and a Responder are asked to split a fixed sum on money in the ultimatum bargaining game, the Proposer will, on average, offer the Responder:
A)nothing.
B)exactly the amount that would be predicted by economic theory.
C)more than would be predicted by standard economic theory.
D)less than would be predicted by standard economic theory.

Accepted Answer

Even though standard economic theory predicts that the Proposer should offer the Responder the smallest dollar amount possible, researchers have found that the Proposer, on average, offers the responder substantially more than this.

Question 3

Traditional economic models assume that people care about:
A)neither absolute nor relative consumption.
B)both absolute and relative consumption.
C)absolute consumption.
D)relative consumption.

Accepted Answer

Traditional economic models assume that people care about absolute consumption rather than how their consumption compares to the consumption of others.

Question 4

In laboratory experiments, researchers have found that the behavior of Proposers and Responders in the ultimatum game is consistent with people:
A)acting in their own narrow self-interest.
B)valuing fairness.
C)behaving irrationally.
D)not understanding the game.

Accepted Answer

In laboratory experiments, the fact that the Proposer offers more than zero and the Responder rejects offers that are too small suggests that people value fairness.

Question 5

The ultimatum bargaining game is a game in which:
A)the second player doesn't know the strategy choice of the first player.
B)the first player confronts the second player with a take-it-or-leave-it offer.
C)both players have a dominant strategy to cheat the other player.
D)both players give each other an ultimatum.

Accepted Answer

The ultimatum bargaining game is a game in which the first player has the power to confront the second player with a take-it-or-leave-it offer.

Question 6

In traditional economic models, people:
A)care about how their consumption compares to the consumption of others.
B)do not care about how their consumption compares to the consumption of others.
C)care only about the consumption of others.
D)care more about losses in consumption than gains in consumption.

Accepted Answer

Traditional economic models assume that people care about absolute consumption rather than how their consumption compares to the consumption of others.

Question 7

In laboratory experiments, the behavior of players in the ultimatum game suggests that people:
A)act in their own narrow self-interest.
B)have impulse control problems.
C)are deceitful.
D)value fairness.

Accepted Answer

In laboratory experiments, the fact that the Proposer offers more than zero and the Responder rejects offers that are too small suggests that people value fairness.

Question 8

Government programs aimed at stimulating personal savings:
A)are designed to take advantage of the flaws in the availability heuristic.
B)help mitigate regression to the mean in most cases.
C)increase welfare if people discount the future too heavily.
D)decrease economic efficiency if people have impulse control problems.

Accepted Answer

If people discount the future too heavily, they may regret not having saved more. Programs that stimulate savings may help mitigate this.

Question 9

If a Proposer and a Responder are asked to split $100 in the ultimatum bargaining game, standard economic theory would predict that the Responder should:
A)reject any amount over $50.
B)accept any amount offered by the Proposer.
C)reject any amount less than $50.
D)only accept an offer for exactly $50.

Accepted Answer

The ultimatum bargaining game is a game in which the first player has the power to confront the second player with a take-it-or-leave-it offer. In this setting, the Responder should accept any amount offered by the Proposer, and the Proposer should offer the Responder the smallest dollar amount possible.

Question 10

If people care about relative consumption rather than absolute consumption, then:
A)their behavior will be consistent with traditional economic models.
B)there is little need for government intervention in markets.
C)their choices will lead to an efficient allocation of resources.
D)individuals' decisions need not lead to socially optimal outcomes.

Accepted Answer

Traditional economic models assume that people care about absolute consumption rather than how their consumption compares to the consumption of others. If people care about relative consumption rather than absolute consumption, then individuals' decisions need not lead to socially optimal outcomes.

Question 11

Laws restricting gambling can be seen as an attempt to limit the consequences of:
A)regression to the mean.
B)status quo bias.
C)anchoring and adjustment.
D)impulse control problems.

Accepted Answer

Many people gamble despite the fact that they regret having done so afterwards. Laws restricting gambling help limit the consequences of impulse control problems.

Quiz 10: An Introduction to Behavioral Economics

If a Proposer and a Responder are asked to split $100 in the ultimatum bargaining game, standard economic theory would predict that the Proposer should offer the Responder:

In numerous experiments, researchers have found that if a Proposer and a Responder are asked to split a fixed sum on money in the ultimatum bargaining game, the Proposer will, on average, offer the Responder:

Traditional economic models assume that people care about:

In laboratory experiments, researchers have found that the behavior of Proposers and Responders in the ultimatum game is consistent with people:

The ultimatum bargaining game is a game in which:

In traditional economic models, people:

In laboratory experiments, the behavior of players in the ultimatum game suggests that people:

Government programs aimed at stimulating personal savings:

If a Proposer and a Responder are asked to split $100 in the ultimatum bargaining game, standard economic theory would predict that the Responder should:

If people care about relative consumption rather than absolute consumption, then:

Laws restricting gambling can be seen as an attempt to limit the consequences of: