Answer the following questions:
1. Are the interests of home sellers and real estate agents the same? How are they different? Is there any evidence to prove either the alignment or disconnect of their interests?
Our interests are aligned because the broker is gaining an interests in your sale. The incentives between the two are not well aligned. When they sell their own homes they get more money for their homes over a client, and leave them on the market longer. This is because the money is going directly into their pockets unlike when they are only collecting a brokerage fee which is minimal. The brokers only really get 1 ½ percent from the sell where they can move on and get more houses to sell. The author suggests waiting a week and pick up an extra ten thousand dollars instead of settling and selling quickly.
2. One theme of the movie is that sometimes honest people have an incentive to cheat. Describe how the sumo wrestling profession is organized, and when and why a wrestler might cheat. What evidence was presented to support the hypothesis that wrestlers cheat?
One of the examples the film uses is the example of teachers cheating in the test scores so that their school would not get in trouble. With an analysis they were able to discover most teachers filled in the answers for the end of the test and those questions were the most difficult. Sumo wrestling is an athletic sport with origins in Japan that puts emphasis on size and strength. The main premise is of two men fighting in a sand pit under the watchful eyes of a traditional referee. The stomping of the feet is a reference to stamping out evil spirits “purity is a good mask for corruption”. When stakes are high and there is an incentive to cheat and because of this there will always be cheaters. The writers believe that there is such a steep division between the top wrestelrs and others so that they are more likely to do their best to stay on top. You must look for patterns over time, and corruption is very difficult to identify or define. They believe it is in the data and can prove their was rampant cheating. Some of the evidence is when a wrestler has already achieved their 8 wins for the match so they allow the other to win over them and trade this deal for the next time. One of the sumo officals was approached by this scientific finding and was saddened by the clear rampant cheating demonstrated from the wresters feeding into incentives.
3. Give an example from the movie where incentives provided unintended consequences.
No matter how smart someone is they will not be able to beat the incentives game. For example the easiest way for the author to potty train his daughter is he had to give her incentives, and gave her m and m’s for her to go to the bathroom. For the next couple of days she constantly went to the bathroom and gained more candy. The beauty of incentives is that you do not know what will work. But they will also backfire in ways that are unpredictable. One of the examples the film gives is the example of a financial incentive for students. The university of Chicago was paying for these incentives so there was no way to lose. Bribary works definitely for children, the author even suggests for 50 cents he could get anything in his household. There were 900 freshman in the experiment, all the students with a c or above gained 50$. With the final payout one of the students actually reached his goal and received the incentive. But in conclusion the actually believed more students would be passing.
4. What is the difference between causality and correlation: Give two examples from the movie that illustrate the difference between the two concepts. The difference between causality and correlation is causality is everything. Correlation means 2 things happen together. Causality means one thing happens and there is another. An example is when the Chicago bulls are going for a championship, the people of Chicago are ecstatic and the mayor