Part 3 - 22 - intro

Question 1

what are ‘anomalies’

Answer 1

observed behaviours that violate an orthodox economic view of what is rational

• present bias
• overweighting/underweighting

Question 2

what is consumer sovereignty

Answer 2

consumers make the best choices for themselves
- gov cant make better choices for them

Question 3

what is pareto imporvement
what is pareto efficiency

Answer 3

improvement on outcome Y = at least one person is better off without hurting anyone

pareto efficient = no other outcome that can pareto improve it

Question 4

difference between internal and external validity

Answer 4

internal - reliable conclusions about an effect that did operate in the experiment

external - reliable conclusions about an effect that would operate outside the experiment

Question 5

what is the point of investigating whether experience effects external validity

Answer 5

• concerns that subjects are inexperienced
• will effect the external validity of anomalies research
• if they act differently in lab to what they would outside

Question 6

how are subjects inexperienced

Answer 6

• facing unfamiliar tasks
• limited time to reflect

Question 7

Plott 1996

how do they defend standard theory

Answer 7

preference discovery

Question 8

what was Plott 1996 argument

Answer 8

choices = 3 stage process:
1. inexperienced - impulsive behaviour
2. experienced
3. converged

• discovered preferences - revealed at the end of the 3 stage process

Question 9

what was Binmores 1999
stance

Answer 9

standard theory can only apply in lab if
- time for learning
- simple problems
- adequate incentives

Question 10

what do plott and binmore predict about experinece and anomalies

Answer 10

the more experienced subjects, the less prevalent anomalies

Question 11

Esponda et al 2024

aim

Answer 11

what is the effect of experience on judgement of probability

• when more experienced
• will they judge probability more accurately
• tests peoples use of Bayes rules

Question 12

Esponda
hypotheses
what did they predict would happen

Answer 12

• many subjects give the wrong answer first time - dont use Bayes rule
• want to test if people will keep getting it wrong after experience

Question 13

Esponda et al 2024 design

Answer 13

• subjects face 200 rounds
• each round:
• assigned a project that has probability of being a success or failure, receives signal of the quality with probability of 0.8 of being correct
• they give the probabilities they assign to project being a success if test is positive/negative
• compare to Bayesian answers
• primitive group (have all of the info needed to compute Bayesian answer)
• no primitive - dont

Question 14

Esponda results

Answer 14

• primitives
• they both start off very far from Bayesian
• results converge but flatten off
• non-primitives more accurate after 200 rounds
• primitives misusing the info given to them

Question 15

Esponda
conclusion

Answer 15

evidenece that experience can make beliefs converge to Bayesian answers over time
- not perfectly