Explain the value function and decision weighting function

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Reference no: EM133156317 , Length: word count:2500

ECON1339 Behavioural Economics - RMIT University

Behavioural Case Studies

Case 1. Using Experiments for Evidence-Based Policy Design

Controlled lab or field experiments powerful tools are powerful tools frequently used in Behavioural Economics. Experiments can be used to determine the effect of different forces in complex situations and to inform policy Describe how experiments can be used to test a new policy idea, making sure to include your recommendations to the Government or organisation involved. Explain the common criticisms of experiments.

Case 2. Bounded Rationality

Explain the insights provided by Bounded Rationality into human decision making. Give examples of (1) the anchoring effect (2) availability effect (3) framing effect and (4) social norm. How are these heuristics relevant to pro-environmental behaviour?

Case 3. Changing Behaviour

Nudging has been shown to affect behaviour in a wide variety of settings. Provide some real-life examples of using nudging to 1) improve compliance and 2) promote pro-social behaviour and discuss why you think these work. Describe any ethical issues and limitations that might arise from your examples.

Case 4. Prospect Theory
Explain the value function and decision weighting function of Prospect Theory in your words. With reference to insights provided by Prospect Theory, explain the behaviour of people who buy home and content insurance and make high-risk investments at the same time. Describe how we can use framing effects to discourage risk seeking behaviour.

Case 5. Long-Run Human Behaviour
Gender and trust norms have been shown to persist in society over a long period of time. Give some examples of norms in Australian society and suggest how these norms might have developed from historical events.

Reference no: EM133156317

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