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DEPARTMENT OF ECONOMICS

August 2023

ECN6510 - Coursework Resit

Question 1

“Prospect theory overcomes the observed violations of expected utility theory.” With reference to the underlying theories and empirical evidence, critically evaluate this statement.

Question 2

The “Save More Tomorrow” program is an initiative in the US that helps promote saving for retirement. The central idea of this program is that individuals commit in the present period to save more in the future (Thaler and Benartzi, 2004).

With reference to competing theories and the empirical evidence, outline the problem of time inconsistent behaviour, provide a critical evaluation of how individuals make intertemporal decisions and comment on how interventions such as the “Save More Tomorrow” program can help overcome this behaviour.

Reference:  Thaler,  R.H.  and  Benartzi,  S.,  2004.  Save  more  tomorrow:  Using behavioral    economics    to     increase    employee     saving. Journal of    Political Economy, 112(S1), pp.S164-S187.