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Identify a personal economic decision that was driven by a behavioural bias rather than by pure rational behaviour. Given your understanding of behavioural economics, how would your decision differ today?

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Darryn D'Souza
Darryn D'SouzaLv10
28 Sep 2019
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Related questions

Economists argue that consumers are utility maximizers who weigh the pleasure of consuming an extra unit versus the cost to consume an extra unit. Behavioural economists and psychologists both question this vision of human interaction. There is a game that behavioural economists use called the dictator game. In this game, two people have to decide how to divide up some money given to them. One person is the dictator who decides what percentage to give to the other player. The second player has only one decision to accept or decline the offer of the first player (who is called the dictator). If the second person accepts the offer both players walk away with the money. If the second player rejects the offer neither the dictator nor the second player gets anything.

So imagine you are playing this game as the second player and you are both given 10 dollars and the dictator decides to offer you 25 cents and that she/he will keep $9.25. Your only choice is to accept the 25 cents or reject the offer and get no money at all.

What would you do? What would be considered rational from the perspective of utility maximization? What would you do if this is a continued game and the same scenario will happen multiple times not just once? Do you think others will react the same way you would?

Write a short (2-3 page, double-spaced, typed) essay, identify at least one important entrepreneur that you would consider an "entrepreneurial legend" and state why you consider the person to be (or have been) exemplary. You must also identify at least one economic decision made by this entrepreneur that was significant in their success and provide a detailed example of that decision. Your reason for selecting the person should include examples of managerial economics and should include other criteria such as social responsibility and ethics.

Scenario: Consider your last big purchase such as a car, appliances, home improvement, home purchase, computer equipment, college tuition, or another "big-ticket" item, which are often purchased using loans/financing (by borrowing money). Also consider your decision-making process that led you to choose a particular make, model, or brand of the product (or service) you purchased and whether it was the right time to make the purchase given economic conditions at the time of your purchase. While analyzing your decision, keep in mind everything from interest rates to the prices of complementary and substitute goods are driven by human economic behavior.

Develop a minimum 1,050-word analysis of your decision-making process in which you include the following:

Retrieve from https://fred.stlouisfed.org and insert into your paper charts showing: Real Gross Domestic Product (Google FRED GDP) Real GDP per Capita (Google FRED GDP per Capita) Real Personal Consumption Expenditures (etc) Median Housing Prices and discuss the trend relationship between these variables since 2005.

Retrieve from https://fred.stlouisfed.org and insert into your paper charts showing: Bank Prime Loan Rate Consumer Price Index Unemployment Rate and discuss the trend relationship between these variables since 2005.

Describe your last big purchase and discuss the influence of the economic varibles charted. Also discuss any government programs, such as tax credits or tax deductions for energy-saving/efficiency purchases, on your decision to make your last big purchase. If government incentives did not factor into your decision, explain why not.

Cite a minimum of three credible sources. Note: The Federal Reserve Bank of St. Louis, the Bureau of Economic Analysis, and the Bureau of Labor Statistics are credible reference sources.

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