this is an Economics Case Study.
Assignment Overview: This assignment is based on an article published in The Scandinavian Journal of Economics called ‘Neuroeconomics: Why Economics Needs Brains’, in 2004, Vol. 106, Issue 3, page 555-79. The article is already attached to this assignment question. Please read the article carefully before attempting this exercise. You will also need to draw on other resources available through the library as well as external resources. Please note that you need to provide clear references for your sources when citing research and data. Learning Objectives: This assignment is designed to encourage you to think about the application of concepts learned in this unit in a real world scenario. This assignment, indeed, is challenging as it raises a question to some of the fundamental assumptions behind the existing economic theories, for example, how rational (from your ﬁrst lecture) an economic agent is ! Economists are asking this question for a while and try to open up the ‘black-box’ by examining the brain mechanism to inform economic theory. 1
As a result the new discipline has emerged called Neuroeconomics. We hope that this assignment will expand the horizon of your thoughts in identifying the limitation of existing economic theories. Assessment: Your score on this assignment contributes towards 30% of your ﬁnal score for this unit. Although you can work in group, this is not a group assignment and you must submit answers individually. Please check the Academic Honesty and Misconduct section in the Unit Guide.You will be graded on your use of appropriate economic theory and concepts, the clarity of exposition and overall quality of your answers. Questions: Answer all questions. Limit the word count of your assignment to less than 3000. Please use diagrams in your answer when appropriate. 1. What is Neuroeconomics? Provide two examples that standard economics failed to explain but the Neuroeconomics can (examples have to be diﬀerent from those examples provided in our article). [6 marks] 2. Explain how diﬀerent lobes of a human brain are interconnected in response to your examples that you suggest for question 1. Which feature(s) of human brain function does work well in these examples? [6 marks] 3. What are the key assumptions of Neuroeconomics? How do they diﬀer as compared to standard economics? [6 marks] 4. Is it possible to explain Global Financial Crisis (GFC) with the help of Neuroeconomics? Explain. [6 marks] 5. Suppose, you are holding a senior marketing executive position in your company. Is it possible to use the knowledge of Neuroeconomics to promote the sales of your company? Explain. [6 marks] 2
Scand. J. of Economics 106(3), 555–579, 2004 DOI: 10.1111/j.1467-9442.2004.00378.x
Neuroeconomics: Why Economics Needs Brains*
Colin F. Camerer
California Institute of Technology, Pasadena, CA 91125, USA firstname.lastname@example.org
Carnegie-Mellon University, Pittsburgh, PA 15213, USA email@example.com
MIT, Cambridge, MA 02139, USA firstname.lastname@example.org
Neuroeconomics uses knowledge about brain mechanisms to inform economic theory. It opens up the ‘‘black box’’ of the brain, much as organizational economics opened up the theory of the firm. Neuroscientists use many tools—including brain imaging, behavior of patients with brain damage, animal behavior and recording single neuron activity. The key insight for economics is that the brain is composed of multiple systems which interact. Controlled systems (‘‘executive function’’) interrupt automatic ones. Brain evidence complicates standard assumptions about basic preference, to include homeostasis and other kinds of state-dependence, and shows emotional activation in ambiguous choice and strategic interaction. Keywords: Behavioral economics; neuroscience; neuroeconomics; brain imaging JEL classification: C91; D81
In a strict sense, all economic activity must...
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