Briefly describe 5 features of “prospect theory”.

Answer the following questions about the article Psychology and Economics to the best of your ability.

I’m grading you on completion, evidence of reading, and subsequent participation in class discussions. Remember the plagiarism rules apply so answers should be unique. You do NOT have to type your answers, however it is encouraged to help with readability. These questions should be answered briefly and just long enough to make the basic point. These questions are designed to ensure you’re thinking about this material before we discuss it as a class. As with all articles, do NOT worry about technical details. I will address any such details in class that I feel are necessary.

1. What is the purpose of this paper? Briefly describe the structure of this paper.

2. Briefly describe 3 dimensions of non-standard preferences. For each dimension describe at least on piece of literature evidence.

3. Briefly explain the difference between a naïve consumer and a sophisticated consumer.

4. Describe the issue of “default effects”.

5. Briefly describe 5 features of “prospect theory”.

6. Based on the evidence presented in this paper, how might prospect theory affect the labor market supply curve?

7. Compare the issue of altruism to social pressure.

8. Describe the problem with the current social preference literature.

9. Describe 3 ways that individuals demonstrate incorrect beliefs. Briefly provide a finding from the literature for each example.

10. What does the author mean by referring to attention as a “scarce resource”?

11. Briefly describe the 5 sub-optimal heuristics seen in menu effects.

12. Compare the emotional effects of mood vs. arousal.

13. Why does the literature assume that only consumers are “irrational”? How do these rational agents adjust to irrational consumers?

14. Why does the author believe these literatures are so important?

15. Where does the author believe the literature is “going” next? I.e. what topics does she believe need additional study?

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