Chapter 11 Econ Behav

Question 1

Discounted Utility (DU) Model

Accepted Answer

means that future utility must be converted to present value of utility, which requires discounting if we are impatient

Question 2

Time perference

Accepted Answer

-Impatient -Hazard Rate -Uncertainity about the future is greater than uncertainty about the present

Question 3

utility discount rate

Accepted Answer

rate at which we convert future value into present value

Question 4

The relationship between the discount factor and the discount rate is

Accepted Answer

δ= 1/1+r -r is the utility discount rate

Question 5

Impulsivity

Accepted Answer

I prefer to delay gratification when it is distant, but I prefer not to delay gratification when it is imminent

Question 6

Procrastination

Accepted Answer

I prefer to get some unpleasant task over with when it is distant, but I prefer to avoid doing it when it is imminent.

Question 7

Hyperbolic discounting

Accepted Answer

The discount rate changes at different times, typically decreasing over time

Question 8

quasi-hyperbolic discounting (also called Beta-delta discounting)

Accepted Answer

Unlike the DU model, there is another term (β) that discounts all delayed outcomes

Question 9

immediacy bias

Accepted Answer

where I show a strong preference for immediate utility relative to almost immediate utility

Question 10

Magnitude effect

Accepted Answer

where small outcomes are discounted more than large ones

Question 11

preference for spreads

Accepted Answer

they prefer to have good outcomes spread out over time

Question 12

duration neglect

Accepted Answer

length of any profile is not given as much weight as the DU model would predict.

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