1) Select ONE of the following:
A) Valuation of “new” goods or goods not tradeable in markets
B) Financial Markets
C) Other economic topic of your choice (Please discuss with me before submitting)
2) Discuss behavioral factors that are relevant to the application you selected; identify some ways in which behavioral factors influence overall activity in the area you discuss. Among the questions you should try to address: Do these behavior patterns violate any of the “standard assumptions” of economics? (For instance, do you think that people involved in these economic tasks behave irrationally?) Do you think that the behavior patterns suggest market inefficiency or some kind of systematic policy failure – Why or why not?
3) What measures would you suggest to mitigate any inefficiencies or failures associated with the issues discussed in (2); or, alternatively, what if any measures might you suggest to improve on the outcomes? (These may be regulations, policy reforms, survey design choices…be as specific as possible here!) Why would the measures you suggest be likely to address any problems? In this part, it will probably be helpful to discuss the ways in which the measures you recommend help address some of the issues associated with “System 1 – System 2” thinking.
Sample Solution