A Catalog Company That Receives the Majority of Its Orders

question 49

Multiple Choice

A catalog company that receives the majority of its orders by telephone conducted a study to determine how long customers were willing to wait on hold before ordering a product. The length of waiting time was found to be a random variable best approximated by an exponential distribution with a mean length of waiting time equal to 3 minutes (i.e. the mean number of calls answered in a minute is 1/3) . What proportion of customers having to hold more than 1.5 minutes will hang up before placing an order?

• A) 0.86466
• B) 0.60653
• C) 0.39347
• D) 0.13534

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Definitions:

Behavioral Economics

Behavioral economics studies how psychological, cognitive, emotional, cultural, and social factors affect the economic decisions of individuals and institutions and the consequences for market prices, returns, and resource allocation.

Availability Heuristic

An intellectual quick-step that employs readily recalled instances when contemplating a certain topic, notion, strategy, or judgment.

Endowment Effect

The phenomenon in which individuals value an owned object higher than its market value simply because they own it.

Prospect Theory

Prospect Theory is a behavioral economic theory that describes how people choose between probabilistic alternatives involving risk, where the probabilities of outcomes are known.