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Time Preferences and Experimental Economics

Description: This quiz covers the concept of time preferences and its experimental analysis in economics.
Number of Questions: 15
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Tags: time preferences experimental economics behavioral economics
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What is the term used to describe the preference for receiving a reward sooner rather than later?

  1. Time Preference

  2. Risk Aversion

  3. Loss Aversion

  4. Framing Effect


Correct Option: A
Explanation:

Time preference refers to the tendency of individuals to prefer receiving a reward sooner rather than later, even if the later reward is objectively larger.

Which of the following is NOT a common method used in experimental economics to study time preferences?

  1. Delay Discounting Tasks

  2. Intertemporal Choice Tasks

  3. Ultimatum Game

  4. Dictator Game


Correct Option: C
Explanation:

The Ultimatum Game and Dictator Game are typically used to study fairness and social preferences, rather than time preferences.

In a delay discounting task, how is the value of a reward typically affected as the delay until its receipt increases?

  1. It increases

  2. It decreases

  3. It remains the same

  4. It depends on the individual's risk preferences


Correct Option: B
Explanation:

In delay discounting tasks, the value of a reward typically decreases as the delay until its receipt increases. This is because individuals tend to prefer receiving rewards sooner rather than later.

Which of the following factors has been found to influence time preferences?

  1. Age

  2. Gender

  3. Culture

  4. All of the above


Correct Option: D
Explanation:

Research has shown that time preferences can be influenced by various factors, including age, gender, culture, and individual characteristics such as personality traits and cognitive abilities.

What is the term used to describe the phenomenon where individuals are willing to pay a premium to receive a reward sooner rather than later?

  1. Time Premium

  2. Delay Discount Rate

  3. Intertemporal Choice

  4. Risk Premium


Correct Option: A
Explanation:

Time premium refers to the additional amount that individuals are willing to pay to receive a reward sooner rather than later. It is a measure of the strength of their time preference.

In an intertemporal choice task, individuals are presented with a choice between:

  1. Two rewards of different sizes available at different times

  2. Two rewards of the same size available at different times

  3. Two rewards of different sizes available at the same time

  4. Two rewards of the same size available at the same time


Correct Option: A
Explanation:

Intertemporal choice tasks typically involve presenting individuals with a choice between two rewards of different sizes available at different times.

Which of the following is NOT a potential explanation for why individuals exhibit time preferences?

  1. Hyperbolic Discounting

  2. Quasi-Hyperbolic Discounting

  3. Exponential Discounting

  4. Loss Aversion


Correct Option: D
Explanation:

Loss aversion is a behavioral bias that describes the tendency for individuals to feel the pain of a loss more strongly than the pleasure of an equivalent gain. While loss aversion can influence economic decision-making, it is not a direct explanation for time preferences.

What is the term used to describe the tendency for individuals to exhibit a steeper discount rate for smaller rewards compared to larger rewards?

  1. Hyperbolic Discounting

  2. Quasi-Hyperbolic Discounting

  3. Exponential Discounting

  4. Loss Aversion


Correct Option: A
Explanation:

Hyperbolic discounting refers to the tendency for individuals to exhibit a steeper discount rate for smaller rewards compared to larger rewards. This means that they are more willing to delay the receipt of a smaller reward than a larger reward.

Which of the following is NOT a potential application of experimental economics in studying time preferences?

  1. Designing retirement savings plans

  2. Evaluating the effectiveness of public policies

  3. Developing new financial products

  4. Studying consumer behavior


Correct Option: D
Explanation:

While experimental economics can be used to study consumer behavior, it is not a direct application of the field. Experimental economics is primarily concerned with the study of economic decision-making in controlled laboratory settings.

What is the term used to describe the tendency for individuals to exhibit a steeper discount rate for rewards that are further in the future compared to rewards that are closer in time?

  1. Hyperbolic Discounting

  2. Quasi-Hyperbolic Discounting

  3. Exponential Discounting

  4. Loss Aversion


Correct Option: C
Explanation:

Exponential discounting refers to the tendency for individuals to exhibit a steeper discount rate for rewards that are further in the future compared to rewards that are closer in time. This means that they are more willing to delay the receipt of a reward that is further in the future.

Which of the following is NOT a potential implication of time preferences for economic behavior?

  1. Saving and investment decisions

  2. Consumption choices

  3. Labor supply decisions

  4. Risk-taking behavior


Correct Option: D
Explanation:

While time preferences can influence saving and investment decisions, consumption choices, and labor supply decisions, they are not directly related to risk-taking behavior. Risk-taking behavior is typically influenced by factors such as risk aversion and risk tolerance.

What is the term used to describe the tendency for individuals to exhibit a steeper discount rate for rewards that are uncertain compared to rewards that are certain?

  1. Hyperbolic Discounting

  2. Quasi-Hyperbolic Discounting

  3. Exponential Discounting

  4. Ambiguity Aversion


Correct Option: D
Explanation:

Ambiguity aversion refers to the tendency for individuals to exhibit a steeper discount rate for rewards that are uncertain compared to rewards that are certain. This means that they are more willing to delay the receipt of a reward that is uncertain.

Which of the following is NOT a potential explanation for why individuals exhibit time preferences?

  1. Self-control problems

  2. Cognitive limitations

  3. Evolutionary factors

  4. Social norms


Correct Option: D
Explanation:

While self-control problems, cognitive limitations, and evolutionary factors are potential explanations for why individuals exhibit time preferences, social norms are not directly related to this phenomenon. Social norms typically influence economic behavior through social interactions and expectations.

What is the term used to describe the tendency for individuals to exhibit a steeper discount rate for rewards that are framed as losses compared to rewards that are framed as gains?

  1. Hyperbolic Discounting

  2. Quasi-Hyperbolic Discounting

  3. Exponential Discounting

  4. Loss Aversion


Correct Option: D
Explanation:

Loss aversion refers to the tendency for individuals to exhibit a steeper discount rate for rewards that are framed as losses compared to rewards that are framed as gains. This means that they are more willing to delay the receipt of a reward that is framed as a loss.

Which of the following is NOT a potential implication of time preferences for public policy?

  1. Designing retirement savings plans

  2. Evaluating the effectiveness of public policies

  3. Developing new financial products

  4. Studying consumer behavior


Correct Option: D
Explanation:

While time preferences can influence the design of retirement savings plans, the evaluation of public policies, and the development of new financial products, they are not directly related to studying consumer behavior. Studying consumer behavior is typically the domain of marketing and consumer research.

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