Lecture 2

Question 1

Asymmetric dominance of conventional cigarettes and low tar cigarette.

E-cigarettes would disrupt this how?

Answer 1

Lower risk than low tar, but similar pleasure, so will directly compete with low tar options

Question 2

Anchoring bias?

Similar to?

Answer 2

When judgment and choice become tethered to
irrelevant information presented at the same time.

Priming - cognitive psychology –when an earlier stimulus (including
subliminal ones) influences response to a later stimulus

Question 3

Arbitrary Coherence

Answer 3

although initial prices are “arbitrary”, once those prices are
established in our minds they will shape our willingness to pay for other items in the
same category relative to the first price (anchor)

ie. once we make a number, our willingness to pay for other items is based on that anchor

Question 4

Factors that Promote Mindless Eating? (4)

Answer 4

Variety – Increasing the variety of food increases
consumption (“the buffet effect”).

Salience & proximity – e.g. product placement on shelves.
“Eye level = buy level”.

Serving containers – not just their size but also their
shape.

Package sizes – larger packages anchor us in the direction of
larger servings & portions.

Question 5

Social Eating behavior?

Answer 5

People anchor on the consumption quantities of others (M&M experiment)

Question 6

Typology of regulation in descending order of intrusiveness?

Answer 6

1. Some regulations benefit some people at the expense of
   others – e.g. redistribution: taxing the rich to give to the poor.
2. Some regulations prevent the individual from harming others
   (counter-acting externalities) – e.g. indoor smoking restrictions.
3. Some regulations impose choices for the individual’s own
   good (paternalism).

Question 7

Asymmetric Paternalism is when policy creates?

Example?

Answer 7

arge benefits for
individuals who are boundedly rational, while imposing little or no
harm for those who are fully rational.

Restricting super-size soda; Putting vegetables first on the buffet line; Express checkout for those not buying dessert

Question 8

Caveats for using nudges?

Answer 8

1) effects modest
2) Works best for one-and-done behaviors
3) Long term efficacy not clear
4) Not a substitute for upstream strategies