The course tests and gives validations on the efficiency of economic theories taught to a student in the economics field. The project entails answering an economic question in an experimental economic class. The…
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The students are supposed to sit in the computer lab and follow all the instructions provided by the instructor. The students bid for this particular product in rounds. The bid must range from $0 up to $20. Every student must be independent and must not be influenced by the decision of the other students (Salmon 34). However, for this to be efficient, no student will be able see the bid of his or her opponent, on all cases. The value to be bidden by the student will be decided randomly. However, the highest bidder will win the auction. If any student does not win the auction, there will be no return or compensation for them. The students are to bid twice for the product. The experiment is carried out to prove that the higher the first bidding price, the higher the chances of winning the auction. The experiment takes few minutes since students involved will only bid and then wait for the next one to bid too. The experiment requires the student to bid in rounds. However, they have to be divided in groups of two. In every round, a student’s makes a bid of his wish. The students should have no knowledge on the bidding process. However, the instructor will have provided the prize value of the product being auctioned. All the bidders who lose will earn nothing. The students too must chose prices above the prize value of the product. This experiment will target at answering the economics question above. At first, students decide to bid their highest price possible in order to win the auction. Most of them even bid the total amount they have, remaining with nothing. However, bidding a first high price increases the chances of winning, as the experiment will show (Ginib 65).
Instructions to the students and the instructor will be important to prevent confusion during the experiment. The students are to sit strategically in the computer room. The instructor will advise the students to rely on
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The research paper intends to discuss the economic anomalies. The paper focuses primarily on the endowment affect, status quo bias and loss aversion. The fact that people ask for much more in giving up an object they hold than the amount they would pay to acquire that object is known as the endowment affect. Status Quo Bias involves a bias for the present state and not accepting changes.
The economic point of view specifically states that interest and personal consumption are highly associated, more consumption is preferred than less and current and future consumptions influence behavior (Berg, Dickhaut, & McCabe 122). In line with this assumption, there is a need to challenge existing belief that an individual’s self-interested behavior prevails in the social context of the economic standpoint.
The authors indicated that the game would require a “volunteer” in order to enjoy a stipulated benefit by all participants of the game. Equilibrium properties were used to predict the outcomes of the probabilities of volunteering depending on the size of the group: the Nash predictions that contend that the probability of volunteering decreases as the number of members in a group increases, attributed to a “diffusion of responsibility” (Goeree, et.al, 3); the quantal response equilibrium (QRE) which incorporates the effects of noice factors requiring “choice probabilities to be consistent with beliefs” (ibid, 4); and the inequity aversion that indicates that “a person who volun
The author has tried to analyse the various aspects of experimental economics and the factors that determine the successes or the failures of such experiments. There are some pre-conceived notions when treating humans as subjects to such experiments, that humans are rational while being selfish.
They focus was on Jerusalem, Tokyo, Pittsburg and Ljubljana in Israel, Japan, USA and Yugoslavia, respectively. The researchers state that these locations were picked since they were ideal for the experiment and equilibrium-point predictions were available to use as control experiments in gauging accuracy.
The experiment consisted of 12 experimental sessions. The laboratory design of each experiment question consisted of an auction market with four buyers and sellers. Buyers made money by buying from the sellers and reselling to the experimenter, while sellers made money by buying from the experimenter and reselling to the buyers.
The term globalization was initially coined by Charles Taze Russell in the year 1897 who was the founder of Student Movement of the Bible and it was through his efforts that people became familiar with this term; however, this phenomenon was widely recognized and used by the renowned economists in the late 1960.
He writes that the best ventures are those that will bring the most rewards. He also says that a Prince should keep their word only if it is to their benefit to do so and that the illusion of keeping one’s word is just as effective as actually keeping it.
Correcting and elaborating the assumption of selfishness has witnessed the clearest progress. This progress came from development of economics and the invention of the ultimatum game theory. Evidence proved that a large number of people would forgo a substantial sum for the sake of denying a larger sum to a stranger who treated them ungenerously (Lisa Cameron 1999).