PEM102 Cognitive and Economic Science
Cognitive and Economic Science
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PEM102 Cognitive and Economic Science
COURSEWORK II
100 points required for full credit. Choose two topics and write two short essays. Aim for a total
length of less than 3000 words, for both answers together. You will not be penalized for writing more than
3000 words; the quality of the arguments will be the only criterion for evaluation. Because of the limited
word count, give only your strongest arguments, and make your writing as clear and as concise as possible.
1. (50 points) Why does heuristic analysis lead to biases in many situations? Discuss the possibility of
unbiased heuristics, keeping in mind that there is a distinction between bias and error.
2. (50 points) What does the Ellsberg paradox say about our behaviour in situations with uncertain
outcomes? Discuss the distinction between uncertainty and risk. Consider measures of risk, like the
variance of the payoff, and think about why it is fundamentally difficult to quantify uncertainty.
3. (50 points) Briefly explain the classical time discounting model, the hyperbolic and quasi-hyperbolic
discounting models, and the multiple-selves model of intertemporal decision making, by focusing on
the important differences.
The work is due at 3pm on Friday, January 14th, 2022, and should be submitted through Moodle.