What standard economic theory are authors implicitly testing

Assignment Help Macroeconomics

Reference no: EM131721328

Question 1: Short Answers

For the questions below, define the relevant terms and provide examples where necessary. Feel free to use math if that helps you to answer the question. Your answers should not exceed -250 words for each sub-question (a through d).

a. What is choice arbitrariness? How does it relate to utility maximization and a person's search heuristics?

b. Explain the endowment effect and the complexity that surrounds it, as shown by Cartwright (2014) when he examines data from List (2004) (see Figure 1). Why is the endowment effect a problem for what we would predict in standard economic interactions without the endowment effect? (e.g. consider its relationship to willingness to pay or accept and market exchange.) What does List show that investigates some of these ideas for market operations?

c. What is the Ellsberg paradox? Explain it by reference to Figure 2 from Halevy (2007) (and in your textbook Cartwright (2014)). What problems does the Ellsberg Paradox create for thinking about how people go about updating their beliefs? Why is this a problem for economic decision-making and what theory/theories serves to explain the existence of the paradox? Explain.

d. What is a trust game experiment? An example of behavior from a trust game in three countries is presented in the Figures 3 and 4 from Ashraf et al. (2006). Comment on the consistency of this observed behavior with standard economic models. What alternative theory/theories serve to explain the behavior?

Question 2 - Consider the paper by Ariely and Wertenbroch (2002) in which the authors investigate the phenomenon of procrastination.

a. What standard economic theory are the authors implicitly testing? Explain the theory and how it works.

b. Consider Figure 5. What are the constituent parts of the experiment and how does it test the theory you explained in a.? What do the results show?

c. What are the alternatives to the theory you explained in a. that are consistent with the evidence presented by Ariely and Werten-broch (2002)? Explain.

Question 3 - For this question, we will use Kube et al. (2012). You can also download the codebook and readme.

a. Explain the research question that the authors try to answer.

b. Describe the experiment and how it tests their research question.

c. Use the data provided to you as a .csv file to reproduce the following elements of the authors' analysis:

i. Figures 2, 3, 4 and 5 (once you have one of the figures, you can simply re-purpose your code to produce most of the others).

ii. The Wilcoxon rank sum (Mann-Whitney) test comparing the productivity between treatments Bottle and Baseline and between treatments Bottle and Money (reported on a 16491 and between Choice and Baselin (reported on p. 1651).

d. Why, as the authors argue, is reciprocity a necessary part of the explanation for what they observe in their experiment?

e. Extra Credit: Reproduce (as close as you can get) Table 2- Regression Results on p. 1654 (not reproduced below). Be sure to use stargazer () if you do in order to make the table as presentable as possible.

Comments on the supplementary files:

The codebook explains the different variable name.
The ReadMe explains the use of the csv data file (which I renamed for ease)

Tips:

Remember to start by loading the packages you need:

library(tidyverse)
library(mosaic)

After you import the csv, I would suggest you use mutate() combined with factor() to change the variables time and treatment into factor variables (categorical variables) rather than numeric or character variables in your data, e.g. YourDataFrameName <- YourDataFrameName 70>Y0 mutate(time = factor(time)). This will make your life easier later when you try to draw the plots in ggplot ().

Pay attention to when you need to filter() your data for different samples for the different graphs.

I would recommend that you set up data tables (data frames) that you define with your data wrangling before you try to create your plots.

Attachment:- Assignment File.rar

Reference no: EM131721328

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