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Too down. fourth on decision part right in the based making most winning, on of and record best track pre- a have the established coaches hire sumably These of world. can the hundreds they in coaches year, the experienced a into dollars reaching League of budgets Football millions National team the With in coaches (NFL). be should it sion, unsuccessful. be to the out if turns day strategy next the the and media fans the deci- screaming in one the second-guessing anticipated are this pressure on the turn game, to may Adding The sion. season, decision. team’s the the make perhaps to The and instant continues. an the game NOT only the affects as has it score coach to because teams matters both FOR of position chances Field case. of opponent each probabilities the pro- for in SALE the position be field but resulting the might strategies, also and that success different points the the by just duced not consider, to factors nteohrhn,i noecnmk h ih deci- right the make can anyone if hand, other the On PLCTO 17.3APPLICATION SEVEN PART on o to orhDown Fourth on it for Going nu Market Input e fyrsteta ed hn‘gigfrit.’’ for ‘‘going when needs team the yards of ber 2006). 340–365. 2006): (April Economy Political of Journal ball,’’ 2 1 2. 1. media) the or fans, owner, team the in (the may. acting who others be may of they preferences, interest losing of of not sorts do risk themselves these any they their have if to Even of it.’’ averse for part ‘‘going very by as points (which be these automatic) and goal almost total field is point a zone current from end Another the points zone. to three close end the count the may to They preferences. close prospect-theory have it’’ coaches that is for possibility of ‘‘going value unsuc- are in the they if of cessful position account field poor full in opponent take the not leaving do mis- they strategic Perhaps a making take. be may They follow prescriptions. not Romer’s did coaches why reasons several suggested Lewis ‘on o t’ pigt ikised oe’ eut suggest from results Romer’s gain teams instead. most to kick deter to needing opting to it,’’ for zone, enough ‘‘going was end yards the two than of more yards ten Within vative. they if yards. it’’ few for ‘‘go a should need need team only a they up zone, backed if end when own Even even one’s successful. it’’ against be to for yards ‘‘go five should as many 10 zone as end within the Teams of wisdom. yards conventional overturned found h rfso,w a ealloigfrpoesrjobs.’’ professor for looking all be may we to study listened professor, all Romer’s sports we the ‘‘If that one, Said professional reaction coaches. some angry among other elicited the the on and improve reported to baseball teams, used of be can performance statistics and not economics by how table’’ the on strategy. aggressive points more ‘‘leaving a adopting were coaches that .Lws ‘fIOl a h Nerve,’’ the Had Only I ‘‘If Lewis, M. 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Choice of Paradox in the subjects the in did varieties as jam all, of at dozens take choice with to the abilities experiment inclined consider the be to cognitive refuse would and limited person approach the person’s cautious again, the the through, sorting that difficulty choices have by would of confronted When number situations. overwhelming unfamiliar an in made decisions regarding especially eairleooissest noprt h eyra osblt fself- of possibility real very the incorporate to seeks economics Behavioral to comes time the When plan. the with stick to easy so always not is it reality, In nu Market Input 10 þ 2 þ 2 þ 2 þ 2 þ 2 þ 2 ¼ 2 ntefrtday first the on 5 0o h first the on 10 icutn n iltr u ohv owlpwrproblems. willpower no have with to out person turn time A will over and problems. will inconsistent discounting we are hyperbola willpower As that a out. preferences to flattening like to and before lead much origin will period, the discounting from current current hyperbolic away the see, with of moves after one compared value off as the future rapidly in leveling on drops drop a placed steep by immediate, is followed the value to utility lower relates ‘‘hyperbolic’’ a word The that utility. fact the to relates nteuiiyere naydydrn h ek tdigpoie total a provides Studying week. the during to day equal day any each utilities on utilities of earned flow sum weight the utility consistent weighted on a the puts puts student on she the shows, or 1 Panel (a) he highest. panel is As weights to perspective. perspective the decision Sunday’s Sunday’s the shows from from make 17.5 utilities will Figure of she sum of or the he (a) that Sunday, so on not plan or study a study with up will coming so, In if ing. and not study, from to utility plan student the out? the to carried Should relative be day). plan are each this 0 numbers of be utility utility to (These taken flow Friday. studying, a on provides 30 so Tuesday, of and on utility leisure activities of alternative other Studying the Monday. has is than study student pleasurable to available less the day is only that the so for Suppose Thursday, Monday and on of Friday. 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Figure is or perspective of he Sunday’s (b) from utility panel in on shown weights are Sunday The on stage utility. today’s of half worth a’ esetv,adtesuetwudedu arigotSna’ lnby that suppose plan number, round Sunday’s a out carrying Sun- up from end as utilities would Monday’s Monday. of from student on sum same studying the weighted the The and be figure. perspective, would the studying day’s of not to (c) as and plan panel same studying in would the from shown are student utilities day, the flow each on (0), 1 weights studying before, students the not arrives, from Monday When sum study. weighted the than greater NOT FOR SALE 0o ody tdiglast ihrgaeo h xm rvdn flow a providing exam, the on grade higher a to leads Studying Monday. on 20 is,tk h aei hc h tdn osntehbthproi discount- hyperbolic exhibit not does student the which in case the take First, utility weigh to person the allowing by captured be can problems Willpower o aetecs nwihtesuetehbt yeblcdsonig ouse To discounting. hyperbolic exhibits student the which in case the take Now w < ssi oexhibit to said is 1 w 5 where , þ w 1 yeblcdiscounting hyperbolic ¼ þ 20) 1 ,maigta tlt ae ntewe sonly is week the in later utility that meaning ½, 20 þ w þ 1 ssm ubrbten0ad1 person A 1. and 0 between number some is þ þ (½)(30) 1 30 þ ¼ w 1 HPE 17 CHAPTER þ 0 eas hswihe u is sum weighted this Because 10. ¼ ¼ 1 osntehbthyperbolic exhibit not does 1 .Bcueti egtdsmis sum weighted this Because 5. ¼ 1 h od‘‘discounting’’ word The . ; eairlEconomics Behavioral urn period. current the after earned utility on weight in drop Steep discounting Hyperbolic 631 a n c hwtewihsta esnwoi o yeblcdsone ol u nuiiis ihrfo the from either utilities, discounter, hyperbolic on (d). a panel put for in would Monday weights and the discounter (b) show hyperbolic panel (d) a in and Sunday not (b) on Panels is perspective Panels (c). study. her who panel to or person Monday, not his or or a from whether (a), decision that panel a from weights Sunday, time of the over perspective utility show of flow (c) the on and puts (a) person a weights the show graphs The 632 IUE17.5 FIGURE Monday Sunday utility utility 0.5 0.5 1 0 1 NOT FOR SALE0 o.Te e.Tu Fri. Thu. Wed. Tue. Mon. u.Mn u.Wd h.Fi Time Fri. Thu. Wed. Tue. Mon. Sun. (a) Consistentpreferences( (c) Consistentpreferences( yeblcDsonigi h tdn Example Student the in Discounting Hyperbolic Monday perspective Sunday perspective ATSEVEN PART hoe o osuy bnoigtepa rmtedybefore. day the from plan the abandoning study, on study- to from earned not utilities utility chooses of on sum weight now weighted Because full The is 17.5. weight. puts ing half Figure student receive of the days (d) day, Later panel current Monday. by the given now now is are Monday flows utility on weights dent’s the a have not students was of who types Even student both study. the same perspective, to than Sunday’s plan more from would utility discounter, student future hyperbolic the discounts studying, student not this for though earned 0 the than greater hnMna rie,tig hnefrtehproi icutr h stu- The discounter. hyperbolic the for change things arrives, Monday When relative 20 w w auto o odyuiiycmae ihFia utility. 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= 1), = 1), þ (½)(30) Time Time ¼ Monday Sunday utility utility .Snetewihe u sngtv,testudent the negative, is sum weighted the Since 5. 0.5 0.5 0 1 0 1 o.Te e.Tu Fri. Thu. Wed. Tue. Mon. u.Mn u.Wd h.Fri. Thu. Wed. Tue. Mon. Sun. (b) Hyperbolicdiscounting( (d) Hyperbolicdiscounting( Monday perspective Sunday perspective w w < 1), < 1), Time es a l h alr oe hi ysader n a isl idt h atto mast the to tied himself has and ears clever- and his eyes for their (known cover Odysseus sailors deaths. the their all to sirens, has off ocean ness) the dive foaming to encounter the sailors to into lure about ships singing their is and appearance Odysseus, irresistible hero, whose epic’s creatures mythical the by captained ship The a hn of think can pwt taeista oeo epte omtt h rgnlpa.Homer’s plan. original the to commit them help come to epic, somehow they try if that can they position strategies Then better with problems. a such up have in they be realize may to enough they self-aware problems, are self-control from suffer people If Strategies Commitment be term. still short but the life in ‘‘fix’’ her or a his for ruining urge is the habit fight the to that powerless realize may addict The of to alcohol. be or signal may be a person may the be but of may way interest save. is to long-run this that cards and the in spending debt credit when borrow reduce spending a on to impulsive into calculation balances of rational herself signal Large a a or making later. him is of spend who out someone and get means to can to person current access the Easy difficult his because worse consumption. beyond problem of the even pleasure make go may the cards, themselves credit using deny of say to they credit, store because hard goals it a savings their find accumulating reaching may from one’s of people Limited some out, returns. prevent benefit investment may work other willpower and long-term interest a accumulated the with of grows for that pain savings consumption the of endure pleasure to or treat regular the a a when without but and flags. often benefits, diet do willpower health healthy to long-term a comes have maintain both time to these intentions because exam- studying routine perfect good are exercise student’s have exercise may decision and a diet life—any People affect to of ples. decisions spheres might The other consequences. willpower many long-term affect with limited may how willpower Limited on behavior. focused have We Applications Further u fuiiisfo odysprpcieis perspective Monday’s from utilities study of to sum plan of the value the on on depends through student follows whether the that student see and to the easy great, is It too instead. leisure is pursues comes, pain study to immediate time do the to the when plans but and time, study of to ahead like so would she or He time. NOT FOR SALE otherwise. not and study to to willpower plans enough on through has carry person the enough, high 20 ehp h otsvr xml fawlpwrpolmi dito odrugs to addiction is problem willpower a of example severe most the Perhaps short-run the off put to people requires Saving saving. to is application Another h yeblcdsone sicnitn over inconsistent is discounter hyperbolic The h Odyssey The þð w Þð 30 w Þ sa esr fwlpwr if willpower: of measure an as hc spstv if positive is which , rvdsammrbeeapeo uhcmimn strategies. commitment such of example memorable a provides , w ie a Given . w h weighted the , w> 2 = 3 .We HPE 17 CHAPTER w is ir uz17.5 Quiz Micro td plan? on study through a carry person same this cost would what For level utils. 20 to costs plan studying a when study on through carry not does dis- counter hyperbolic the that shows example The eairlEconomics Behavioral 633 634

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R 0 , 0 behavior. bad punishing and behavior good Rewarding Reciprocity 639 640

NOT FOR SALE diinlpeeecsfrfins.I c,ol h lyrwoersls ae bu the about cares less earns who have player players’ players the both changes only payoffs. (b) one (c), in In gap as In payoffs. fairness. monetary change about for payoffs only preferences the response care additional how a they (a), without show panel implemented panels In is three preferences. that The 1 player 2. by player choice from a involves game dictator The ATSEVEN PART ste eewe acr etripsdfnsfrbiglt opc pchildren up pick to Pickup. late Daycare being for for Late unexpected, fines 17.6; imposed quite Application center be in daycare can a consequences when people The were lead they commercial. can as as it dealing because the for consequences reframe perverse much to into have money as leading can Introducing matter, relationship fairly. extract or personal to altruistically to a begin more values try behave to other They example, dealings, for maximizers. people, personal people In payoff possible. dealings, rational as commercial as themselves In behave transactions. to personal tend and commercial be may between experiment details. an minute in on another depend may view it to because uses unstable player less Exactly quite one pay payoffs. reference a monetary may of maximize others’’ in frame ‘‘anonymous instead what and as involved values against interpersonal Subjects members matched to them. are attention community toward they values fellow those interpersonal regard as strong regard who show who the against may Subjects of matched enterprise experiments. some common are lab explain in also they shown may general those values This a interpersonal had globe. one in the if variance around expected everyone be toward might to than tends altruism giving communities charitable community within why perhaps explain concentrated and might This be friends, strangers. family, to so toward with. less altruistic but interacting members, very is one be whom might on person depending A differ may values interpersonal One’s Dealings Personal be versus cannot Market subject the experiments. that the out ensuring carrying person procedures theories watching. the other is detailed by these one observed test including no to used sure fairness, experiments are the of they of some if discusses differently 5.4 behave Application People fair. being actually IUE17.9 FIGURE 9 , 1 n ealta em ohv nipratefc nbhvo stedistinction the is behavior on effect important an have to seems that detail One o Even Low (a) Monetary payoffs Monetary (a) 1 nu Market Input ittrGame Dictator 5 , 5 1 , –7 Low (b) Symmetric fairnes 1 Even s 5 , 5 9 , –7 o Even Low (c) Envy 1 5 , 5 NOT FOR SALE Studies Behavior Economic Experiments,’’ and Bargaining in Anonymity and Rights, Property h xeietivle acr centers. daycare involved experiment The Fines Late made being offers to lower with out accepted. fairness, turned and less behavior between much transaction experimental exhibit market sellers, a and as seen, up buyers Dressing game have offers. low same we rejecting exact and as the money divi- of even framing, pot offering the usual of fairness, sions for the preference with a exhibit lab people the in is Game run Ultimatum the When as dealings. transactions personal market to opposed in differently behave to seem People 2 the fine, the 1 to experiment: the adjust into to twist another time introduced parents researchers allowing After Persistence nteefc ffaigtascin sete omrilor commercial either as personal. transactions framing of effect the on twr n fe on twrhhl ob late. be to worthwhile later it bit found a often staying and of benefit work the at with stopped com- cost $5 just transaction small, Parents the the on pared commercial. up became imposed, and show was personal to fine being hard a very the tried When of and time. well-being workers the the and on center weight considerable put parents the doubled. late problem, up showed lateness who parents the of reducing number was of fines the the Instead of $5 of effect The surprising. about late). sample minutes to more (amounting or a 10 fine being selected for monetary a randomly impose to They centers city. in within centers same experiment daycare of the number an a approached conducted they which researchers problem, ness workers. the for center its burdensome pay the be must keep may it and to because overtime center Having workers the day. for expensive the is of late or end open his the up at pick over- to child or late her up absent-minded show an sometimes can that parent is worked centers daycare at blem .Gez n .Rsihn,‘AFn saPrice,’’ a is Fine ‘‘A Rustichini, A. and Gneezy U. ‘‘Preferences, Smith, V. and Shachat, K. McCabe, K. Hoffman, E. n xlnto sta,pirt h iebigimposed, being fine the to prior that, is explanation One late- this on incentives monetary of effect the study To Jnay20) 1–17. 2000): (January 1 nqefedeprmn hd oelight more sheds experiment field unique A Nvme 94:346–380. 1994): (November PLCTO 17.6APPLICATION 2 eena pro- perennial A aefrDyaePickup Daycare for Late ora fLegal of Journal Games HPE 17 CHAPTER ee fteata fine. the actual of the regardless center of persisted level attitude the this toward and attitudes workers, fine its parents’ and temporary adjust as a to Apparently, parents enough fine. late was a many had as never twice that have that centers to Centers effect. continued no fines all had at had fines fines the the removing Removing by centers. quo the status the to back went they o’ i uiesadPleasure and Business Mix Don’t 2. 1. to according act to suggest people values. engage interpersonal experiment to their way field a the be may from this that results money of The consideration prices. removing a and by to market placed the effectively first is of activity at outside advan- much so the puzzling that all market about the be of learned tages might has who It economics hap- of family. often student same the the within and time it, pens the for all money out exchanging other these to each without for favors help what colleagues pay owes work, who At to of whom? just track keeping efficient than more rather things be it changing Wouldn’t cash any run hands. without who favors other neighbors perform to also relationships. eggs and out and personal flour ‘‘lend’’ into to tend money People very introduce be may to people reluctant why suggests experiment daycare The eairi hs situations? on effect these perverse in a behavior or effect the anticipated ‘‘bad’’ Did the for behavior. have ‘‘good’’ prices for applied bonuses were small fines or behavior small where experience situations personal your of from examples some of Think the vertical (on fine the late axis). were the horizontal (on of level it pickups graph the against late the if plotted were of might axis) What number How average $6? $500? if even to look or $5 $50 to from increased the increased if pickups were late of fine number the to happen would What eairlEconomics Behavioral T O T HINK A BOUT 641 642

NOT FOR SALE ATSEVEN PART ae rhwte r detsd(rt nLniglw nteUie tts)if and States.) amounts United loan the on 17.1. interest in Application information in of laws from suggested level rates Lending as the interest in periods regulate miscalculate (Truth to might advertised tend government are people The they used. can how for be person applying or after can a rates period cards it waiting a of before requiring might number or card card the a each government for on limit the cap credit sub- the a problems, or savings putting have much willpower their perhaps too cards, borrow have or to credit or led mistakes regulate be minimum calculation to are thought certain and of are a people little because if above too side, save borrowing save the to to On sidized. people forced lead if biases off behavioral better Social bank that and IRAs bonds, is the as programs such (stocks, in interventions Security Security way government Social for including Governments own argument programs, them. One retirement their States. for their United money in through the this invest savings do and effect the directly in them invest could tax government could to The or people accounts) 14.1. Application to in it Accounts discussed Retirement leave States, exempting Individual United by with say the done savings, is in as subsidize (IRAs) tax, could income it a from or save earnings income, to interest people their requiring of say 15% plan, savings of a minimum mandate to be would decision savings little. tempted consumption. are too there immediate save because of little to lure too people save the to biasing by people lead perhaps may decision, also willpower savings to ability wrong Limits cognitive and to the limits to calculations Therefore, lead mistakes. interest to may in lead complicated often discussed involve which As math, can save. hard or other decision borrow the to decisions 17.1, consider Application example, concrete a take To Decisions in Savings and question Borrowing controversial below. sides a both from is ideas This present to failures. try will market we so decreasing increas- economics, of for than chance decisions good right rather a the has ing paternalism make government to that information argue best They participants themselves. and that incentives counter strongest economists a the neoclassical play have Some should behavioral rationality. government overcome Some to and the mistakes limits profit. participants’ that other fix own argue to markets their to consumer in for intervening reasoning role, understand of biases paternalistic line may these this exploit firms use to economists sophisticated try deci- ‘‘wrong’’ may Moreover, the and market. make biases to the participants in lead may sions willpower the and when ability cognitive example marginal for above price inefficiency, raise loss. to deadweight of a order source to in leading output a cost, restricted be 11 Chapter can in we power monopolist chapters earlier market yet information In that 16). asymmetric (Chapter saw was externalities was One other the markets. encountered and in we 15) failures, (Chapter inefficiency market on of book sources the of possible part two last this in chapters other the In IMPLICATIONS POLICY osbegvrmn nevnin htmgthl epemk h ‘‘right’’ the make people help might that interventions government Possible to limits failures: market of source another yet offers economics Behavioral nu Market Input ftegvrmn nevnsi h aktwt euain,txs rsbiisfor subsidies or taxes, regulations, with market the in intervenes government the If Market the ‘‘Nudging’’ In run. long so choice. the in shoppers, market or the imperfect in product persist each them may ‘‘right’’ choices serve make expensive one to or bad may run offer to that long limitations firms converging the cognitive market in people’s persist the addition, may than choices and rather products niche there and of things, However, different range ones. like bad whole consumers Different out a do. drive can will firms competition Good what choices cost. to good limits marginal and are at consumers firms, sold be bad for will out best these drive and are will run, perfect long that of the services in model produced and The be economics. products will in that interest suggest recent might of matter competition a is rationality to limit problems the mitigate term, long economics. the behavioral behavioral over solve by could, suggested that mechanisms these solutions a of and recognize in Any may products biases. care market providing The special well-being. in of efficient, opportunity take level perfectly profitable satisfactory be and not fairly may a decisions quo provide status may difficult the it toward especially bias a recognize a Although be those. will to making opportunity new or the to sure one is good ‘‘too one unless good are quo that status offers the with avoid sticking to true,’’ be learn friends, may experienced People from professionals. advice to or seek learn may colleagues, may or People experience time. with over decisions lessen better may make mistakes these of consequences 9. the takes, Chapter in as do just to losses, shown deadweight to were lead taxes will and to mistakes by controls fact interventions improved price in government not be then are can view, that choices that this so influence takes ways not one systematic are If They in intervention. rationality. mistaken government to are limits decisions of beha- people’s existence in sure the research proved that has convinced economics completely vioral not are economists neoclassical Some Solutions Market economics. behavioral in by paternalistic identified are problems here the interventions on government again the based alcohol. nature, for and tobacco arguments tax the heavily the of or could around restrict Many governments and government many narcotics the course certain Of ban overeating, already foods. to world high-fat or leading high-calorie are tax overall or choices tax ban perhaps irrational or at If by offerings choices space. stores’ by raised restrict shelf overwhelmed could problems be government the to the thought outlets, address retail are could consumers If areas economics. other behavioral in interventions Government Services and Goods Other 12 problem behavioral underlying the about wrong being risks it reasons, paternalistic opttv Markets,’’ Competitive NOT FOR SALE e .Gbi n .Lisn ‘hoddAtiue,Cnue ypa n nomto upeso in Suppression Information and Myopia, Consumer Attributes, ‘‘Shrouded Laibson, D. and Gabaix X. See hte optto yisl a vnulyoecm n eairlba or bias behavioral any overcome eventually can itself by competition Whether mis- make undoubtedly people although that be would view extreme less A urel ora fEconomics of Journal Quarterly My20) 505–540. 2006): (May HPE 17 CHAPTER eairlEconomics Behavioral 12 643 644

h ra nihsdsusdi h hpe include chapter the decisions of in Some following. discussed actual ones. the insights rational broad why fully the idealized, to and from seeks depart area whether psychology research of growing understand fields this the economics, and behavioral integrating to By introduction economics. an provided chapter This SUMMARY NOT FOR SALE ATSEVEN PART ragn odi aeei ies hthatyiesaeecutrdfirst. encountered are items healthy that to so plans line spheres health cafeteria other defaults a many sensible in people—in offering food for arranging from best ranging be savings, might retirement that are besides choices ones how ‘‘nudging’’ highlight idea—of to same presented the apply should governments and firms saving for some so. reasons at do default special to the with choose set still employees to can Those less be participation. would of response level policy moderate natural a retirement, for little 14 13 almost participation, were to employees switched enrolled. of was employees half default the the than of When all less 401(k). plans, a the in enroll into to opt found to nonparticipation, decision was active default the an When requiring employees. their to offer firms which plans, in badly too doing not up end will option, default. distorting default the the from a with made loss stick have they deadweight otherwise if may any decision, who bad so consumers option but restricted, different minimized, some be not for should is decisions opt free Choice choice to them choose. default allow so a to they provide but if to consumers most is for transactions good voluntary is that of features best the stan- retaining a packages. in food information of nutritional back the display on to format terms. requirement dard complicated the very and is the different compare example very to Another with used loans be can two that of number attractiveness simple relative quote a to loans, lenders Truth for required the rates which with percentage of States annual provision one United above, the information mentioned in laws such done Lending was provide in This firms sup- format. that by standard mandating some either in by this usually or do itself can information government the helps The plying that choices. information risk. simple complicated less of make with availability the consumers problems increase behavioral to try solve can help government The may choice interventions voluntary Milder before. preserve none that was there where loss deadweight introducing and nvriyPes 2008). Press, University Economics of Journal Quarterly .MdinadD .Se,‘TePwro ugsin nri n41k atcpto n aig Behavior,’’ Savings Sunstein, and R. Participation C. 401(k) in and Inertia Thaler Suggestion: H. of R. Power ‘‘The Shea, F. D. and Madrian B. eetpplrbo ytolaigbhvoa cnmsssget that suggests economists behavioral leading two by book popular recent A neapei rvddb eie-otiuinrtrmn ln,401(k) plans, retirement defined-contribution by provided is example An still while problems behavioral address can that intervention mild Another nu Market Input Nvme 01:1149–1187. 2001): (November ug:IpoigDcsosAotHat,Wat,adHappiness and Wealth, Health, About Decisions Improving Nudge: 13 ffrsaecnendta hi mlye aetoo save employees their that concerned are firms If ontv blt a eepcal tandwhen strained especially be may ability Cognitive • classified be can rationality full from Departures • cs rmlil tp fraoig Experiments reasoning. of steps multiple or cho- ices, of number overwhelming an uncertainty, las, formu- complicated involve that decisions making to self-interest. limits to ability, limits cognitive and willpower, to limits ways: three in 14 (Yale AQ3 AQ4 EIWQUESTIONS REVIEW 6. 2. 1. 5. 4. NOT FOR SALE3. epewt iie iloe a eaein- behave may willpower limited with People • prospect is model behavioral influential early, An • tlt ucin o sti ifrn rmthe from different a this on is captured this How is function? How utility risks. small to averse etrofbigkont esotsgtd Are is short-sighted. be player to a known Game, being Centipede off the better in that Argue 4? uncertainty Chapter under in discussed choice about theory standard hoyi ih?Hwcudtetere etested According be which theories experiments? the policy using could apart for How right? make is it theory does preferences. difference true What people’s of understanding a providing new as anomalies decision the in view mistakes Others making. of evidence as anomalies view the Some experiments. by the uncovered of anomalies views different have from economists ways? Behavioral firms other or prevent this in to consumers exploiting forces Would market be? expect this you might limitation cognitive of What sort shoppers. of limitation cognitive a exploit economists. trying to stores to to due is puzzling this that suggested be this have Some might why Explain pricing forth). of so sort prices and see $5.99, we that $1.99, (so is of 99 market in ending the prices charge in stores observed often oddity One advances? knowledge as each to change merits of relative the merits expect you relative Would approach? the are What neoclassical economics. and behavioral between Distinguish chapter. this in mak- identified decision ing rational to limits three the Describe nwihpol’ eiin r evl weighted heavily are decisions people’s discounting, hyperbolic which of in model the comes. time studied being the We when then plan the but with stick smoking, to unable quit to or planning study, example, exercise, for time, over consistently the of changed. framing is the situation only when in with settings decisions equivalent different People make may gambles). preferences these small regarding risk be neutral should people dislike stan- suggests which the and theory, (contrasting dard point point this reference from losses a small as wealth their take current people theory, this to According theory. these in decisions. biases of systematic sorts some uncovered have opopc hoy epeaevery are people theory, prospect to HPE 17 CHAPTER 11. 10. 9. 8. 7. eairleooispoie ute rationale further a provides economics Behavioral • max- to act not may people settings, strategic In • etfritreigt ov hs te market other these solve failures? to intervening for argu- the ment than weaker or beha- stronger solve problems to vioral intervening for argument called the been Is for? have other might where What book intervention view. the government in this identified of were cons failures market and pros Exp- government.’’ the paternalistic lain a in by intervention market the justifies economics this ‘‘Behavioral against and support statement. in both arguments vide Pro- by governments.’’ or decisions firms as not such but organizations decisions consumer into hts insig- important provides information? economics free ‘‘Behavioral away give that sites favor- other your Web of information.ite some two fit away best least to give seem motives to at Which sites Give Web for altruistic. motives author be site Web just The charge. may of free sites Web Inter- net on available is information of amount subjects. vast to A matter each values much interpersonal how these out of Ulti- sort could the that to Game matum related experiments reci- Suggest and procity. fairness, altruism, commitment between world. of Distinguish real the examples in rationality? used his other devices of three level the the Provide to about tied indicate himself mast having Odysseus’s did biases? behavioral What have to known useful be be would to it which in settings other any there u tl lo epet reycos other choose freely to people allow options. people still for good be but to high- judge they to that policymakers choices for light be may compromise govern- mistakes. A as the decisions if rational welfare misconstrues ment social harm may inter- ventions Such participants. of decisions irrational correct the to markets in intervention government for model to ways values. studied interpersonal these We justice. altruism, and as may such fairness, they values interpersonal because other payoffs have monetary their imize well- future being. their than rather current their toward eairlEconomics Behavioral 645 646 h eod orpnistenx,etc.). pennies next, two the day, pennies first four the second, penny the one (so penny for a day from each a size in $100,000 doubles that provides money first for The day prizes. two between 17.1 PROBLEMS en oe hti ae wyfo player. a from away taken is numbers that negative money with these being payoffs, that monetary Imagine are 5.1. payoffs Figure in Dilemma Prisoners’ 17.3 NOT FOR SALE a and $5,000 is function money utility winning over Your nothing. of winning of chance chance gamble 90% 10% Finally, an a nothing. and winning provides $1,000 of winning chance of Gamble 89% chance $1,000. 11% winning an of provides chance Gamble 100% $5,000, nothing. a winning winning vides of of chance 1% chance a 10% and a $1,000, winning Gamble chapter. the in gambles as four same the involving experiments lab Allais 17.2 .I h is cnro o r ie choice a given are you scenario, first the In b. of values for results your Graph b. .Spoeta lyr aeapeeec o fair- for preference a have players that Suppose b. scenarios, two the in choices your Compare d. .Poietefruafrteaon fmoney of amount the for formula the Provide a. .Cmueyu xetduiiyfo ahof each from utility expected your Compute a. .Spoeta lyr nycr bu monetary about care only players that Suppose a. .I h eodseai,yuaegvnachoice a given are you scenario, second the In c. .Uigyu rp,avs h eoo which on hero the advise graph, your Using c. mgn htyuaeasbeti n fMaurice of one in subject a are you that Imagine ue ie rgnsaighr choice a hero dragon-slaying a gives queen A ee akt hpe ,i atclrt the to particular in 5, Chapter to back Refer ewe gambles between function? utility your given choose gambles between gambles. four the after eut eotdi h text. the experimental in actual reported the results to them compare and function? utility your given choose days num- of the ber on depending choose should he prize days. 31 to 0 om idtepr-taeyNs equilibria. normal Nash pure-strategy new the a Find form. down writing by change would payoffs Dilemma Prisoners’ dollar the how each Show offs. for pay- util their between value) 1 absolute (in difference loses player Each ness. equilibria. Nash egy $1 with payoffs, d as h eodpoie naon of amount an provides second the days; d U aspoie yec prize. each by provided days ð x Þ¼ d novdi h ue’ offer. queen’s the in involved ATSEVEN PART p ¼ x C A A . tl idtepure-strat- the Find util. 1 and rvdsa8%cac of chance 89% a provides and D B hc ol you would Which . hc ol you would Which . nu Market Input d d agn from ranging asstarting days B pro- D C fteSxsi iue55 mgn htteepayoffs these that Imagine payoffs. 5.5. monetary Figure are in Sexes the of 17.4 ealta h aof r oeaypayoffs. monetary are payoffs the that Recall 17.5 .Spoeta lyr r efcl efes get- selfless, perfectly are players that Suppose d. .Spoeta lyr aeeteepreferences extreme have players that Suppose b. .Spoeta lyr r i are players that Suppose b. .Spoeta lyr nycr bu monetary about care only players that Suppose a. .Spoeta lyr nycr bu monetary about care only players that Suppose a. .Spoeta lyr aedfeetfairness different have players that Suppose c. .Spoeta lyr aedfeetfairness different have players that Suppose c. .Spoeta lyr r efcl altruistic, perfectly are players that Suppose c. ee akt hpe ,i atclrt h Battle the to particular in 5, Chapter to back Refer ee oteUtmtmGm nFgr 17.8. Figure in Game Ultimatum the to Refer onteetniefr elcigtenew the Write reflecting earnings. form own extensive their the for down utility earns no player other but the dollar each for util 1 ting subgame- the equilibrium. Find perfect payoffs. new form the extensive reflecting the down Write earnings. their aof,wt $1 with payoffs, Prisoners’ preferences. the equilibria. new Nash pure-strategy of the these Find form reflecting normal Dilemma the Write player. other down the than earns she dollar or each he about for less util cares 1 loses money player less That fairness. only earns that who Suppose player b. the part in than preferences taeyNs equilibria? Nash strategy aof,wt $1 with payoffs, equilibria. Nash of pure-strategy advantage. the Battle Find preferences. the new dollar these of reflecting Sexes form each the normal for the down more, utils Write earning 10 about guilty losing feels player This earns player the who only Now b. part in than preferences pure-strat- equilibria. writing the Nash Find by egy form. the change normal new in would a Sexes payoffs down the the of how Battle Show between payoffs. value) absolute their (in each for difference utils 10 dollar loses player Each fairness. for eevn tlfrec olri h u of sum the in dollar each for util 1 receiving equilibrium. pay- subgame-perfect the new Find the offs. reflecting form extensive the Write but earns. down earn player other they the dollar dollar each for each util ½ for util 1 receive They equilibrium. perfect more ¼ ¼ fairness. about cares money tl htaetepure- the are What util. 1 tl idtesubgame- the Find util. 1 pretyaltruistic. mperfectly ie h uswih ncretpro tlt but utility period current on 1 weight future only weight weighs impul- puts more Will She is on Becky sive. Tuesday. utility. study current as on same will the test utility they a much for how Monday Sunday on planning 17.7 vari- there. twenty-four 17.3 the Figure in see shown to eties overwhelmed is She jam. 17.6 r Hyperbola Mr. Consistency Mr. 0 odyfo tdig Let studying. from Monday is elzdi eid3 edn oagi f20in 250 weights of period: following each gain the utilities put a on They to utils. 3 leading period 3, of terms period bene- health in provides realized Exercise in fits, 100 utils. of 2 loss period a of to terms leading enjoyable activities, much less leisure is how other Exercise for than 2. plan period a in with exercise will up they come to trying each are 17.8 NOT test. FOR the perform- on thus well and ing studying from Tuesday SALE on utility of < .Spoeseue ifrn ytmfrmaking for system different a uses she Suppose b. .Udrwa odtoson conditions what Under b. .Spoesemkshrdcso yevaluating by decision her makes she Suppose a. .Udrwa odto on condition what Under a. w npro ,M.CnitnyadM.Hyperbola Mr. and Consistency Mr. 1, period In iladBcyaetocleesuet h are who students college two are Becky and Will ui iishrlclgoeysoet u a of jar a buy to store grocery local her visits Julia e odcd oueti system? this takes use it to time decide the to the reduced her and she comparisons of Has number them. among from com- parisons pair-wise best the the all makes takes and she category each Then, best. the find to category the within just the the comparisons of pair-wise making and each separately considers categories she separate First, decision. her if her comparison? take each for it second will 1 requires long she how and make, to have she does comparisons many How varieties. four twenty- the among comparison pair-wise every outcome the choosing prefers? 2 up player that end 1 player Does equilibrium. subgame-perfect the Find payoffs. eurdfrhrt ar hog nhrplan? her is on condition through carry What to test? her the for required for study to plan plan? his is on condition through What carry to test? him the for required for study to plan < .Let 1. w nuiiyere nftr eid where periods future in earned utility on CURRENT s PERIOD etecs ntrso tlt on utility of terms in cost the be .50.175 0.25 0.35 0.5 1 1 b CURRENT PERIOD AFTER etebnfti terms in benefit the be ONE s s and and b b W PERIODS TWO ol Becky would ol Will would CURRENT AFTER ONE HPE 17 CHAPTER a indu ob ujc na xeiet Before $10,000. experiment. is an wealth in his experiment, subject the a He starting be utility. will to expected up he highest signed gambles, the has giving between one choice the the choose dol- with per utils Faced 2 off lar. subtracts point loss reference A each dollar. this per beyond below for util gain 1 worth util A is this point. 1 point, reference reference this gains the in He wealth point. of dollar reference a gamble as a taking serves to prior wealth His function. utility ing 17.9 eid fe h urn one. for current 30% the further after a periods reduced are Hyperbola’s Mr. that difference the is Consistency’s; Mr. to related Hyperbola’s are Mr. weights period. on each weight half by Consistency’s falls utility Mr. future table, this to According le.Tespl uv is curve supply The plied. 17.10 .So htM.Hproawudntfollow not would Hyperbola Mr. that Show b. .I eodeprmn,h sgvna$100 a given is he experiment, second a In b. .I is xeiet ei ie choice a given is he experiment, first a In a. .WudM.Cnitnypa oeecs in exercise to plan Consistency Mr. Would a. .SpoeM.Hproacudsg contract a sign could Hyperbola Mr. Suppose c. .AePt’ hie nprsaadbtesame the b and a parts in choices Pete’s Are c. rsetPt’ rfrne r ie ytefollow- the by given are preferences Pete’s Prospect rn-at oaocisaecmeiieysup- competitively are chips potato Trans-fatty vncac fwnig$5 rlsn $100. losing or $250 Gamble winning of Gamble chance even gambles. two between i plan? his an How up plan. exercise would his give high with stick to not does he him if at forced valued money that of amount 1 period in plan. exercise his on through this on through 2? follow period in he plan Would 1? period trigbns hn ei ie h choice the given is Gamble gambles. different two he between Then, bonus. starting choose? he would gamble nee hneo inn 10o oig$200. Gamble losing or $150 winning of chance even an ia elhlvlh nsu ihatrthe after with up the ends about he cared experiment? level only he wealth if final make would he as gambles? the from gets of he part amount as the bonus starting $100 the considers he that meaning wealth, $10,000 reference initial starting his his is point change $100 choice his the Would bonus? including point his calculates he reference if make he would choice What eairlEconomics Behavioral D B eut nals f$0wt certainty. with $70 of loss a in results rvds$0wt etit.Which certainty. with $30 provides p aet et ephmcmi to commit him help to be to have Q s ¼ P 2 : p tl npro 2 period in utils A fesan offers C offers 647 648

NOT FOR SALE is chips potato these for Demand .Spoeta osmr aeirtoa deci- irrational make consumers that Suppose b. .Cmueteeulbimpie uniy con- quantity, price, equilibrium the Compute a. hi ecie r‘msae’ eadis ‘‘mistaken’’ demand or perceived their already, given as is if decisions rational demand made true they their Although chips. potato bags of many too buy willpower to or them leading cognitive limitations, of because either sions social and surplus, welfare. producer surplus, sumer Q D Q ATSEVEN PART ¼ D 100 ¼ 200 2 P : 2 P nu Market Input : .Spoeisedtegvrmn aeamis- a made government the instead Suppose d. .Wa e-nttxcudtegovernment the could tax per-unit What c. htdawih oshstegovernment the tax? has the with decisions. introduced loss rational deadweight from What stemming true the demand actually is demand second the and take pro- loss deadweight this blem? correct to impose the compute and market loss. the deadweight of diagram a on triangle quantity loss deadweight and the Demonstrate price now. equilibrium the Compute NOT FOR SALE check. Please check? 13. please as twice given found has 4 14 MSS number In check. footnote ED: Please the AQ4: footnote. manuscript this In for ED: missing AQ3: reference Cross occurrence? ED: this AQ2: check Please ED: AQ1: uhrQueries Author