Midterm

Question 1

What is the Scientific Method?

Answer 1

A complicated loop (not a straight line); Problem, information, hypothesis, test, analysis, conclusion, communication

Question 2

Why Experiments in Economics?

Answer 2

Test standard assumptions in models, identify biases and irrationalities, etc.

Question 3

Nature of Experiments

Answer 3

They don’t prove anything. All science is imperfect. Theories are always revised. Never dead or proven.

Question 4

3 Components of a Scientific Economic Study

Answer 4

Environment, Institution, Behavior

Question 5

What is of interest and the thing that drives a particular experiment?

Answer 5

Either the environment, institution, or behavior

Question 6

Environment

Answer 6

What makes up an economic system (people (subjects, experimenter), resources, constraints); What

Question 7

Institution

Answer 7

The set of rules governing the interaction of agents or use of resources; What influences the decision-making process?

Question 8

Behavior

Answer 8

The decisions that agents make; What happened? How much?

Question 9

Ways to explore the component of interest

Answer 9

Theory, Existing Data Analysis, Experiments

Question 10

Use of Theory to explore

Answer 10

Limited applicability, abstract/artificial (math), perfect identification

Question 11

Data Analysis exploration

Answer 11

Fixed environment, real world, imperfect (or impossible) identification; causal inference possible, but never identification

Question 12

Experiments exploration

Answer 12

Partly constructed and organic, creates new data, randomized identification (but still imperfect)

Question 13

Incentives (definition)

Answer 13

Something that incites or tends to incite to action or greater effort

Question 14

Examples of incentives (and what’s the best)

Answer 14

Cash, Class Credit, Shocks, Points, etc.

Question 15

Why do people give?

Answer 15

Utility function includes others’ utility.

Question 16

What’s warm-glow?

Answer 16

Satisfaction from giving to someone Ui()=x+f(payments to j by i)

Question 17

Altruism function

Answer 17

Ui(Uj)=x+Uj(10-x)

Question 18

Inequity Aversion

Answer 18

Resistance of inequalities

Question 19

Hawthorne Effects

Answer 19

Change of subject’s behavior when knowing they’re being watched (doesn’t require intentionality)

Question 20

Experimenter Demand Effects

Answer 20

Change of subject’s behavior to what the experimenter wants (requires intentionality)

Question 21

Observer Effects

Answer 21

Observation changes behavior (doesn’t require subject awareness)

Question 22

Social Distance

Answer 22

Sense of familiarity or non-familiarity

Question 23

How does guilt come into play?

Answer 23

People don’t like appearing unfair to others or themselves

Question 24

Describe an ultimatum game

Answer 24

Have money, give to other player and they accept/reject