BS3373 Behavioural Economics Assessment Brief 2026 | Aston University

BS3373 Assessment Brief

Please consider this as an Open Book Assessment, you are not expected to spend the entirety of the allotted time on your assessment.

File/Format Requirements

1. Please complete this Fixed Window assessment on a MS Word document.
2. Include your candidate number (6 digit) and Module Code and Name
3. Formatting should be Arial font, Size: 12 point and 1.5 spacing.
4. You must combine all answers, figures, tables, and calculations into one document. (any hand-written calculations or answers, should be scanned or photographed, and inserted into the word file).
5. Save your FILE (MS Word or PDF) as “Module Code – Candidate Number”. E.g. BN3378 -123456.
6. NOTE: Spot checks via oral verification may apply to this module.

Instructions to candidates

1. Submit to the Module code Turnitin link by 16:00 (4pm) on the date of assessment.
2. Please note this is a fixed time assessment and the 5-calendar day lateness window will not apply. You will not be able to submit after the deadline.
3. Answer TWO (2) questions out of three.
4. The word limit is 1,500 WORDS PER QUESTION.
5. ALL questions carry equal marks.

Additional Instructions

1. Citations and References: You should cite sources in-text. In addition, please provide full bibliographic details of the academic studies you use in part (b) of the exam questions.
2. Diagrams, Figures or Tables – If you are including any diagrams, figures or tables in your answer which have not been created by you, you must reference the source. Any visual tables, diagrams or infographics should be taken from reputable sources such as academic journals, periodicals and consultancy sources such as McKinsey and similar. Please avoid using material from obscure websites and essay sites. All diagrams used should be discussed and explained properly. Figures should be cited in the main text and appropriately explained. You MUST NOT contact the module leader, teaching team or Assessment & Awards Team through email during the 7-hr period, when the assessment is taking place, with any queries related to the assessment questions to ensure fairness to all students. Please answer the questions to the best of your abilities and your own understanding.

Declaration

I declare that I have personally prepared this assignment.  The work is my own, carried out personally by me unless otherwise stated and has not been generated using Artificial Intelligence tools unless specified as a clearly stated approved component of the assessment brief.  All sources of information, including quotations, are acknowledged by means of the appropriate citations and references.  I declare that this work has not gained credit previously for another module at this or another University.

I understand that plagiarism, collusion, copying another student and commissioning (which for the avoidance of doubt includes the use of essay mills and other paid for assessment writing services, as well as unattributed use of work generated by

Artificial Intelligence tools) are regarded as offences against the University’s Assessment Regulations and may result in formal disciplinary proceedings.

I understand that by submitting this assessment, I declare myself fit to be able to undertake the assessment and accept the outcome of the assessment as valid.

BS3373 Assessment Questions

Answer Any Two (2) Out Of The Three (3) Questions.

Question 1: Possibility Effect  

Word Limit: 1500 Words

(a)Suppose you are a producer of antibiotics which carry a 10% risk of digestive system side effects (indigestion). You currently sell 500,000 packs a year for £5 each. You are considering improving your production technology to decrease the risk of indigestion. In order to investigate potential gain from such an improvement, your marketing research team ran focus groups and found that on average consumers would be happy to pay £1 more for an antibiotic which carries a 2% risk of indigestion and £3 more for an antibiotic which carries no risk of indigestion. Your production team informs you that the marginal cost of producing an antibiotic with less frequent side effects is increasing. In particular, a reduction in risk of indigestion by x% would increase your per-pack cost by £0.02x². Should you invest in reducing the risk of indigestion, and if so, should you reduce it by 8% or by 10%? Why are consumers happy to pay more to reduce the risk from 2% to 0%, compared to reducing the risk from 10% to 2%?  [15 marks]

(b) Critically evaluate empirical evidence of the possibility effect with reference to an academic study. Explain whether the study has complied with the five experimental principles studied in the module. [15 marks]

(c) With reference to a real-life company, discuss how firms can exploit potential errors made by consumers arising from the possibility effect; in particular, consumers whose probability weighting is as distorted as it is in part (a) of the question. In your answer, contrast these behaviours with the choices of a rational agent in the same situation and suggest ways consumers can be protected from the potential errors arising from the possibility effect. [20 marks]

Question 2: Law Of Small Numbers

Word Limit: 1500 Words

(a) Suppose you are choosing a wealth manager out of three candidates:

Suppose client retention is due to pure chance. The probability of each client staying with their wealth manager in any given year is 0.5 (different clients’ decisions to stay are independent from each other). Calculate the probability of each wealth manager retaining 100% of their clients last year. What is the relationship between the sample size and the probability of an extreme outcome occurring in that sample? Which wealth manager would be chosen by a client who suffers from the Law of Small Numbers? Comment on whether it is a good choice. [15 marks]

(b) Critically evaluate empirical evidence of the Law of Small Numbers with reference to an academic study. Explain whether the study has complied with the five experimental principles studied in the module. [15 marks]

(c) With reference to a real-life example, discuss potential errors economic agents can make due to the Law of Small Numbers, in particular, when facing sample sizes like those in part (a) of the question. In your answer, contrast these errors with the judgement of a rational economic agent, and suggest potential remedies for the errors.   [20 marks]

Question 3: Fairness

Word Limit: 1500 Words

(a) Consider the asymmetric Prisoner’s Dilemma game below:

Player 1 – cooperate defect                              Player 2 – cooperate defect

Suppose both players are motivated by fairness. That is, each player acts to maximise the weighted average of their own payoff and their opponent’s payoff:

Calculate the utility of each player in all four outcomes (cells) of the game. In this transformed game, find each player’s best responses to both strategies of the opponent. What is the predicted outcome of the game if players are motivated by fairness? Is it a realistic prediction in an asymmetric Prisoner’s Dilemma? What can we conclude about the predictive power of the fairness model in this game?  [15 marks]

(b) Critically evaluate empirical evidence of fairness with reference to an academic study. Explain whether the study has complied with the five experimental principles studied in the module.  [15 marks]

(c) With reference to a real-life company, discuss how employees’ effort level or productivity can be affected by their preference for fairness, and suggest how firms can optimally respond to it. In particular, consider employees whose preferences can be described by the utility function in part (a) of the question. In your answer, clearly explain why you think employees’ behaviour was influenced by preference for fairness and contrast it with rational agents’ behaviour in the same situation. [20 marks]

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