Rationality in Economics
Framing
Problem 1 [N = 152]
Imagine that the U. S. is preparing for the outbreak of an unusual Asian disease, which is
expected to kill 600 people. Two alternative programs to combat the
disease have been proposed. Assume that the exact scientific estimate of the
consequences of the programs are as follows:
If Program A is adopted 200 people will be saved.
If Program B is adopted, there is a 1/3 probability that 600 people will be saved and a 2/3
probability that no people will be saved.
Which program do you favor?
Problem 2 [N = 155]
Two new programs
If Program C is adopted 400 people will die.
If Program D is adopted there is 1/3 probability that nobody will die and a 2/3 probability
that 600 people will die.
Which of these two programs do you favor?
The Wason (Peter) card test
Below are four cards, each has a letter on one side and a number on the other.
Consider the rule: If a card has a A one side, it must have a 3 on the other.
A
B
3
7
Which cards must be turned over (the minimum number necessary) to determine if the
rule is violated.
Bayesian decision making
Consider a test to detect a disease whose prevalence is 1/1000. Suppose the test has a
false positive rate of 5% and a 0% false negative rate. What is the
probability that someone who tests positive for the disease actually has the disease?
Assuming the individual has no other symptoms.
When this problem was given to sixty students and staff at Harvard Medical School the
mode answer was .95 and mean was .56.
Use Bayes’ theorem to solve this problem:
P(A|B) = [P(A) x P(B|A)]/P(B)
The Linda Problem
Linda is 31 years old, single, outspoken, and very bright. She majored in philosophy in
college. As a student she was deeply concerned with issues of discrimination and social
justice, and also participated in antinuclear demonstrations. Please rank the following
statements by their probability, using 1 for the most probable and 8 for the least probable.
a.
b
c.
d.
e.
f.
g.
h.
Linda is a teacher in an elementary school
Linda works in a bookstore and takes Yoga classes
Linda is active in the feminist movement
Linda is a psychiatric social worker
Linda is a member of the League of Women Voters
Linda is a bank teller
Linda is an insurance salesperson
Linda is a bank teller and is active in the feminist movement
Conjunctions