ECOS3997

Tutorial 2

1 Allais Paradox
Consider the following two choices. Do you prefer A or B? How about C vs.
D? Why?

• Option A is $1,000,000 for sure

• Option B is $1,000,000 with 89% chance, $5,000,000 with 10% chance,

and nothing with 1% chance

• Option C is $1,000,000 with 11% chance, and nothing with 89% chance

• Option D is $5,000,000 with 10% chance, and nothing with 90% chance
A>B>D>C显⽰出实际观察到的选择与期望效⽤理论的预测不⼀致。

2 Preferences over losses

Suppose you stood an 80% chance of losing $40. Would you prefer the ex-
pected loss of $32, or would you rather take your chances? Why?

⼤多数⼈都喜欢冒险。 此选择与具有标准凹⾯效⽤函数的预期效⽤不兼容。

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3 Default effect
Research shows that when people have a choice between two options, having
one option as the default will often make it substantially more likely that
they end up with that option (as compared with a choice with no default).
This is true even in cases in which the choice is highly consequential. For
example, whether or not to put money away to save for retirement.
Why do you think the default matters so much? Can we understand it
using the economics you studied so far in your degree?
Please note that there are multiple reasons for the effectiveness of the
default effect. Some—but not all—are discussed in the lecture.
默认效果表明许多⼈没有明确的偏好，否则他们只会选择⾃⼰喜欢的选项。
请注意，这假设切换选择⾮常容易。 如果很困难，⼈们可能会拖延选择的选择。

4 Social influence
People’s behaviour is, to a quite substantial extent, influenced by the be-
haviour of other people. These effects can be both positive and negative. For
example, people can be influenced to study more, consumer less energy, etc.
if that’s what other people do, but they can also be influenced to study less
and consume more energy if that’s what other people do.
For this exercise, try to think of cases where your own behaviour and/or
that of others was influenced by how other people behave. Think also what
sort of people are most likely to influence your behaviour: friends? neigh-
bours? celebrities and Instagram influencers? Are some type of influencers
more effective for some types of behaviours? Is there a way to make social
influences positive rather than negative?