Session 4

Question 1

Exponentional discounting

Answer 1

Formula: PV = FV / (1+i)t
Wher PV = Present value
FV = Future Value
i = intrest
t= times

Question 2

Homo Economicus
= Rational

Answer 2

Expected Utility Theory: Monetary
wealth has diminishing marginal utility.
Decision-makers should be risk
averse.
Forward-looking and patient. The
present is just another moment in time

Question 3

Homo Sapiens
= Predictably Irrational

Answer 3

Prospect Theory: Diminishing
sensitivity to gains and losses relative
to a reference point. Loss aversion.
Decision-makers can be risk averse or
risk seeking.
Myopic. The present is especially
important and valuable.

Question 4

Save more tomorrow

Answer 4

Present Bias: Ask to commit now to saving more in the future
Loss aversion: Link increases in savings to future pay raises
Limted attention: once enrolled you remain in the program unless you opt out

Question 5

Rats and running to cheese

Answer 5

Rats run faster to the cheese the closer they get

Question 6

Purchase aceleeration as a function of smaller goal distance

Answer 6

The mean difference between the first and
the last observed interpurchase times was
.7 days (t = 2.6, p < .05), representing an
average acceleration of 20% from the first to
the last interpurchase time. As an estimate
of the overall effect of acceleration on the
average card, it is possible to compare the
mean observed time to complete a card,
which was 24.6 days, with the number of
days it would have taken to complete a card
at the rate of the first observed
interpurchase time, which was 29.4 days.
This yields a difference of nearly 5 days
(16%) in card completion time.

Question 7

Illusionary goal progress

Answer 7

Accelarates pruchases when you have a 10 stamp card or a 12 stamp cards but get two bonus stamps people who het the 2 bonus stamps will purchaes faster again.

Question 8

Goals as reference points

Answer 8

Goals, like reference points, divide outcomes into regions of good and bad,
success and failure.