Prof.
Bryan Caplan
bcaplan@gmu.edu
http://www.bcaplan.com
Econ
812
HW
#8 (answer question #1, plus any FOUR other questions)
1. Prove/show that the Allais paradox violates
EU theory regardless of whether preferences are risk-averse, risk-neutral, or
risk-preferring.
2. What is the most empirically important choice
theory anomaly? What real-world puzzles
would you use it to explain? (1 page)
3. What aspects of your behavior today were NOT
compatible with narrow selfishness?
Discuss specific behavioral choices motivated by altruism, fairness, and
vindictiveness. (1 page)
4. Does prospect theory, in its simple or
sophisticated forms, provide a better description of your own choice behavior
than EU theory? (1 page)
5. Does your own behavior conform to basic
neoclassical intertemporal choice theory?
Upon reflection, are there any changes you would might to make to your
consumption path and/or portfolio? (1 page)
6. Do you suffer from belief perseverance and/or
confirmatory bias? Discuss specific examples.
(1 page)
7. Do you suffer from availability and/or
representativeness bias? Discuss
specific examples. (1 page)
8. "Much of the empirical evidence of
cognitive bias itself illustrates cognitive biases." Discuss.
(1 page)
9. Why do people have systematically biased
beliefs about economics? Can the
existing literature on cognitive bias be used to explain Caplan's findings, or
not? (1 page)