Microeconomics (2nd Edition) (Pearson Series in Economics)
2nd Edition
ISBN: 9780134492049
Author: Daron Acemoglu, David Laibson, John List
Publisher: PEARSON
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Chapter 18, Problem 12P
To determine
Probability of Pizza King being the better restaurant based on observed and acquired information.
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You are trying to decide between rescuing a puppy or an older dog. You decide to try to assign some numbers to your
preferences so you can compare options. You estimate that your utility for a dog that will chew your furniture is 0.1 and
your utility for a dog that can go on hikes with you is 0.8. You expect that a puppy will have an 70% chance of chewing
your belongings and a 90% chance of going on hikes.
What is your expected utility for getting the puppy?
You are considering two options for your next family vacation. You can visit Disney World or Chicago. Your utility from Disney World is 100 if the weather is clear, and 0 if it rains. Chicago is worth a utility of 70 if the weather is clear and a utility of 40 if the weather is rainy. Also assume that the chance of rain at Disney World is going to be 50% and the chance of rain in Chicago is 40%. As a utility maximizer, should you plan to go to Disney World or Chicago?
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In 'the dictator' game, one player (the dictator) chooses how to divide a pot of $10 between herself and another player (the recipient). The recipient does not have an opportunity to reject the proposed distribution. As such, if the dictator only cares about how much money she makes, she should keep all $10 for herself and give the recipient nothing. However, when economists conduct experiments with the dictator game, they find that dictators often offer strictly positive amounts to the recipients.
Are dictators behaving irrationally in these experiments? Whether you think they are or not, your response should try to provide an explanation for the behavior.
Chapter 18 Solutions
Microeconomics (2nd Edition) (Pearson Series in Economics)
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