Utility Theory + Rationality Flashcards
Neuroeconomics
Interdisciplinary study of how people make decisions that connect brain activity with behavior.
Subjective Value
What something is worth to us.
Reward
Something an animal or person will work to get.
Punishment
Something an animal or person will work to avoid.
Utility
Measure of value used in economic models.
Axiom
A statement that can be accepted without controversy.
What are the 4 Utility Functions requirements?
Monotonicity, WARP, GARP & Convexity
What is a goal of Neuroeconmics?
Finding a unified theory of decision making?
Budget Set
All possible consumption bundles that are affordable given a person’s income and the prices of goods.
Budget Line
Shows the consumption bundles where all of the person’s income is spent.
Utility Function
Assigns value to bundles of goods.
Monotonicity
More of a good is preferred to less.
Convexity
Mix of goods is better.
GARP for Kids Study
Aim: Examine changes in rational choice during development
Objectives:
-2nd graders, 5th graders and undergrads do a GARP task to see if there are changes in the number of GARP violations.
-Explore whether # of GARP violations are correlated with math ability.
Winerabe GARP Teens
Aim: To explore the relationship between emerging mood disorders such as anxiety and depression, and rationality in decision-making.
Methods: Examining participants’ mood scores using three psychological self-report questionnaires, conducting an experiment, and analyzing data from the participants
Results: The study suggested that these participants’ rationality scores are equivalent to the expected scores of fourth graders.
