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Behavioral Economics Lesson Five: Other Things Matter
Source: Council for Economic Education (EconEdLink) | Type: Lesson

COMPELLING QUESTION Under what circumstances do people not behave like rational Econs? Students will participate in a version of the classic behavioral economics experiment entitled the Ultimatum Game. The class will be divided in halves, with one half being the proposers and the other half being the responders. Each proposer will be given the choice of how to split a reward of 10 items with the responder. This reward can be 10 extra credit points, 10 pieces of candy, 10 stickers, or some other small reward that can easily be divided and has at least some value to the students. The proposer remains anonymous to the responder so that no influences, such as friendship or a fear of retaliation, influence decision-making. The proposer will put forth an offer. It is up to the responder to choose to accept or reject the offer. If the offer is accepted, both the proposer and the responder get the agreed upon amount. If the responder rejects the offer, neither the responder nor the proposer receive any reward (no one gets anything). Students will play two rounds of this game. The discussion of the results includes comparisons between the thought and decision making process of “Econs” and “Humans.” The rational decision-making of an Econ is contrasted with that of the fairness-minded human. Students will also learn and discuss the results of an experiment in which other emotions matter, such as the meaningfulness of the work that one does and how it can affect our productivity and the amount a worker would demand in payment for their work. 




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