List all the differences between decision and experienced utilities that you can

Question

List all the differences between decision and experienced utilities that you can think of. Think about an example of framing that may affect your own choices. Exercises 2.22, 3.16 from Aigner's book. Standard economic models prescribe how rational people should make their choices; accurately describe how people make choices in experiments; assert that people should be altruistic; all of the above. Behavioral economic models prescribe how rational people should make their choices; require utility maximization; fit experimental data better than standard models; none of the above. Bounded rationality describes procedures that people use to make choices with limited cognitive resources; can be consistent with utility maximization; can contradict both completeness and transitivity; all of the above. Decision utility is consistent with framing; satisficing procedure; context effects; none of the above. Experienced utility is used to describe individual choices; maximized by rational decision makers; accurately measured by neuroeconomic methods; none of the above. An Ebay seller sells a product at a $20 with $5 shipping. Then he raises the price to $25, but makes shipping FREE. His sales increase by 40%. This example illustrates a context effect; intransitivity; framing; utility maximization. A phone company sells three models of phones at prices $80, $100, and $200. When it adds another model at a price $40, the sales of the $80-phone double. This is best described as a context effect; intransitivity; framing; utility maximization.

Explanation / Answer

4. D

5. A

6. D

7. B

8. C

9. B

10. A

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