DT Quiz Questions

Suppose choice rule C is not rational. Then many strange things can happen, but ONE of the following is impossible ...

I'm not sure correct answer

Which of the following is the main advantage of the WTP approach?

It allows us to measure the intensity of people's preferences

Which of the following is not required for quasi-linear utility representation?

More is better

What is the key reason that for consumer choice data we use GARP instead of Sen's axioms?

Not all possible menus are budget sets.

The first-best choice rule is rational.

True

When we say "event 𝐸 occurred", what we really mean is that the realized state is an element of 𝐸.

True

A key difficulty is that the experiment designer does not know the odds of each lottery

false

According to the readings, poor people are more likely to be persuaded by a discount deal on computer tablets.

false

An Anscombe-Aumann act is essentially like a two-tier compound lottery that has no probabilities on the branches anywhere.

false

Anscombe and Aumann suggest estimating subjective probability assessments using Likert scales

false

Anscombe-Aumann manage to measure state-dependent utility

false

Anscombe-Aumann's ingenious idea was to mix unknown probabilities with known utilities

false

Discounting future payoffs is inherently irrational.

false

EU theory is useless when you don't know the probabilities.

false

Events 𝐴 and 𝐵 are independent if and only if 𝑝(𝐴∣𝐵)=𝑝(𝐴)𝑝(𝐵).

false

Every rational choice over acts admits an expected utility representation

false

If I am maximizing utility u and you observe enough of my choices, you can correctly infer the function u even if we never utter a word.

false

If chocolate is your favorite ice cream flavor but apple pie is your favorite dessert, your choices violate Sen's alpha.

false

If you take a strictly increasing transformation of the utility index, that always represents the same underlying preference

false

In decision theory jargon, an event is the result of acts and outcomes.

false

Option x is revealed preferred to y if and only if x is chosen whenever y is available.

false

The expectation of a random variable is equal to its most likely outcome.

false

With enough data, the utility function can be identified perfectly.

false

continuity is best interpreted as a consistency notion that says you should be indifferent between lotteries that yield the same average return

false

moving office hours to a different time slot is a Pareto improvement

false

Δ𝑋 could represent an apple

false

𝜋(𝑥) is an outcome

false

Ambiguity aversion means that a decision maker prefers a sure gain of $0 to a 50-50 gamble of either winning or losing $100

false (because know the probabilities; therefore this describes risk aversion)

𝜋 is a real number between 0 and 1

false (𝜋 is the lottery whereas 𝜋(x) is the probability)

the quickest way to prove that an arbitrary utility represents and independent and continuous preference is to

find a strictly increasing transformation that is of the expected utility form

in contrast to ambiguity, risk...

has known odds

Sophistication refers to ...

he decision-makers awareness of her present bias.

To estimate the utility index, you want to first

identify the subject's ranking over degenerate lotteries

in order to be compatible with EU, the revealed preference of a choice must satisfy ...

independence and continuity axioms

We say that a choice rule is rationalizable if and only if

it can be generated through a preference

You are going on a blind date tonight, but you care about looking great only if the date is interesting. If you spend a lot of time getting ready, that means...

it's impossible to tell if you are sure the date is going to be interesting of if you care very much about looking your best for an interesting date is driving your choice

Incentive compatibility has to do with

making sure truthful reporting is in the subjects best interest

Akerlof's model captures one reason for a

market shutdown

The reading mentions that you should NOT try to interpret which of the following measures of Likert scale data?

mean

When simplifying a compound lottery, the rule is to

multiply the probabilities along each arm and then sum across arms with the same outcome.

Axioms should be phrased in terms of

observable patterns of choice

Simplicity of a model is also called...

parsimony

Leontief utility captures the case of

perfect complements

The WTP approach relies on...

quasilinear utility representation

Akerlof's model is an example of economics with

rational agents

The binary relation ⪰𝑅 is necessarily

reflexive

Your statistician friend is desperate her infant keeps her awake most of the night. She is wearing a sleep tracker and by now, she has pretty good data on her sleep. The interruptions vary each night, but the overall distribution has been steady for weeks. As your friend is planning her ideal bedtime for tonight...

she is facing risk

One reading suggests that the "shy trump voter" hypothesis is unlikely to be the key reason because

support was also underestimated for less controversial Republican candidates

The correlation between assessed house value and door number is attributed to ...

the anchoring effect

When writing down a binary relation in a table, the convention is that a dot in a cell means that

the corresponding row is related to the corresponding column

The big gap between people's willingness-to-buy and willingness-to-pay for basketball tickets is best explained by

the endowment effect

When a car dealer offers you a cash discount rather than a credit surcharge, that is because of

the framing effect

In terms of human subjects research ethics, "justice" refers to

the selection of subjects

An example of asymmetric information is when

the seller knows more about the quality of a product than the buyer

When a manager keeps investing into an unprofitable project rather than starting over from scratch, he may suffer from

the sunk cost fallacy

For lunch, you and your friend decide to buy a salad from Modern market. However, once you arrive, you both order Pizza. How does this relate to the lesson today?

this is an example where your stated preference (for salad) was not equal to revealed preference (for pizza)

"Groupthink" occurs in networks with

too many connections

Let X be the set of English-language words. Consider the binary relation that says 𝑥𝑅𝑦 if and only if 𝑥 is listed at least a page before 𝑦 in a particular English language dictionary. This binary relation is (check all that apply) ...

transitive

A compound lottery describes a two-stage random process.

true

A satisfying choice rule is rational

true

Any rational choice can be explained by a utility maximization model.

true

If skiing is your favorite sport but sledding is your favorite winter sport, your choices violate Sen's alpha.

true

In order to be compatible with EU, a choice must be rational

true

Independence is best interpreted as a consistency notion that says your preference shouldn't switch just because your selection may not matter in some contingencies

true

The central tendency bias refers to the fact that agents shy away from the extreme responses of a Likert scale.

true

The utilitarian approach maximizes the same of everyone's utility

true

With subjective probabilities, it is difficult to distinguish between beliefs and risk attitude.

true

X is the set of possible outcomes

true

the preference of a rational agent does not evolve, thought the environment might.

true

the preference representation for any rational choice rule is unique

true

𝜋 is an element of Δ𝑋

true

𝜋(𝑥) denotes the likelihood of obtaining x

true

What is the negation of ∀𝑥𝑅(𝑥)∨𝑄(𝑥) ? - Check all that apply.

¬∀𝑥𝑅(𝑥)∨𝑄(𝑥) ∃𝑥(¬𝑅(𝑥))∧(¬𝑄(𝑥)) & 1 more?

Which of the following is necessary and sufficient to ensure that x∈𝐶⪰(𝐴)?

𝑥∈𝐴 and 𝑥⪰𝑦 for all 𝑦∈𝐴

You are drawing ICs for an increasing preference over 2-D bundles of goods. Which of the following properties have to be satisfied?

--IC do not cross --IC extend all the way to the edges of the drawing

Which of the following is true for any consumer choice data? (Check all that apply.)

--If the data satisfies GARP, it may have been generated by someone who maximizes a strictly increasing utility function. --If the data does not satisfy GARP, it cannot have been generated by someone who maximizes a strictly increasing utility function.

Standard economic theory...

--assumes agents are fully rational --assumes away cognitive biases that have systematically been demonstrated by psychologists

a rational decision maker...

--behaves as if his choices are driven by a preference ranking --has a certain consistency across his choices

which of the following strategies does establish a choice rule C is rational?

--equal to induced choice of a preference --satisfies Houthakker's axiom --satisfies Sen's alpha and Sen's beta

What are some concerns regarding state WTP?

--may not give well though out answers --may interpret question differently --may exaggerate their WTP to please the survey conductor

Which of the following is NOT mentioned as a concern regarding stated WTP?

--respondents may not participate in the survey because of underlying health issues

In the readings, one study attempts to measure the impact of poverty on decision making through a series of games. They disadvantage some participants by giving them fewer scoring attempts, and find that (check all that apply)

-disadvantaged participants have higher success rates per attempt -disadvantaged participants are more likely to borrow at steep interest rates

The lottery 𝛿𝖤[𝜋] corresponds to

. getting for sure the average return of $\pi$

How many degrees of freedom do you have when estimating the utility index?

2

If bundle 𝑝𝑘⋅𝑥𝑗=𝑤𝑘 (meaning bundle 𝑥𝑗 uses up your entire wealth in setting 𝑘), then

??

You read that 𝐶({𝑎,𝑏,𝑐})={𝑎,𝑐}. You interpret this as

An agent was asked to choose between options a, b, and c, and sometimes picked a and sometimes picked c

When discussing choice functions, what do we refer to as the `menu' ?

Any particular subset A of X (NOT the set X that lists all potential alternatives and NOT the agent's choice C(A))

which of the following strategies does NOT establish choice rule C is rational?

C is equal to the revealed choice of a complete choice

The reading makes a distinction between informational effects and

direct-benefit effects (ex// fax machine)

The expected utility model assigns...

a payoff to each outcome

At the current moment, behavioral economics refers mostly to

a set of distinct decision-making models where each focuses on a specific bias

You are betting on a basketball team during March Madness. In estimating your odds of winning, you are facing...

ambiguity

Second-best procedures are used in particular to

assign infrastructure projects

When reports of unrelated criminal activity make jurors impose harsher sentences, that is evidence of

availability bias

In the quasi-hyperbolic discounting model, a present bias is captured when

beta < 1

As an example of negative contagion, the simulation considers

binge drinking

Any two quasilinear utilities 𝑢,𝑢̃ for the same choice rule differ only ..

by an additive constant, i.e. 𝑢(𝑥,𝑚)=𝑢̃(𝑥,𝑚)+𝑐 for some 𝑐.

The reference-dependent utility model contains two utility indices, referring to

consumptions and gain-loss utility

The utility index of a risk-loving decision maker is

convex

In the video, I suggest that the satisfycing rule is a good description for

dating