Next Exam !

Exam 7 Saturday January 4th

9:00 to 11:30 Men BG 088

Women B3 059 !

All Lectures and Chapters

Microeconomics Lecture 22

!

Asymmetric Information Behavioral Economics

Key Terms !

asymmetric information moral hazard agent principal adverse selection behavioral economics

agent

a person acting for another person

principal

a person for whom another person is

acting for

moral hazard

to act differently because someone else will pay the

costs

asymmetric information

unequal information

Who knows more about the car?

Asymmetric Information Not Equal

Symmetric Asymmetric

Buyer Seller

adverse selection

taking advantage of someone’s lack of

knowledge

adverse selection

making a bad choice due to lack of information

moral hazard

changing behavior after the transaction to make the other

party worse off

moral hazard

temptation to act immorally

behavioral economics

the psychology of economic behavior

Are people always rational?

Maybe not

Are people always rational?

overconfidence too quick to conclude

don’t easily change !

Is fairness in more important than money?

It can be !

Ultimatum Game

Exam 725 questions

review six previous exams

150 questions