6. Behavioral Economics concepts:
a. Suppose that two sales representatives are trying to sell insulation for peoples’ homes. Sales rep. A tells
people “You will save big money by replacing the insulation in your home.” Sales rep. B tells people “You are
losing money by not replacing the insulation in your home.” If Sales rep B sells more insulation (and the sales
reps are identical is all other respects), we might attribute sales rep B’s higher sales to what behavioral
economics concept?
b. Suppose that studies indicate that “most people”, if given a choice between $50 today and $100 a year from
today, would choose the $50 today, but that, if given a choice between $50 nine years from today and $100 ten
years from today, would choose the $100 ten years from today. This is an example of ___________________
discounting.
c. Two identical restaurants have identical menus and identical wine lists, except that restaurant A lists its menu
items and wines from most expensive to least expensive, while restaurant B lists its menu items and wines
from least expensive to most expensive. If restaurant A has higher revenue per customer than restaurant B, we
might attribute this to what behavior economics concept?
d. Trevor has decided on a savings plan that he believes is optimal for him. He will save $5,000 this year and
$8,000 next year. When next year arrives, however, he decides to save only $5,000. What is the term used to
describe this sort of behavior?
e. In an informal survey, students offered a bet on the toss of a fair coin in which they stood to lose $1 if the
coined turn up tails, required a payoff of $1.63 if the coined turned up heads. This implies that the utility
associated with gaining $1.63 was equal to the disutility of losing $1, and is an example of what behavioral
economics concept?
