Assume that your ß and ∂ are both strictly greater than zero but strictly smaller than one. At time 0, you are given the
Posted: Thu May 12, 2022 8:58 am
Assume that your ß and ∂ are both strictly greater than
zero but strictly smaller than one. At time 0, you are given
the choice between the following three options: A (3 utiles at
time 0), B (4 utiles at time 1), and C
(5 utiles at time 2).
(a) Suppose that you discount the future exponentially and that
you are indifferent between A and B at time 0. What does this tell
you about your ∂? (5 points)
(b) For all the remaining questions, suppose that you discount the
future hyperbolically. As a matter of fact, at time 0, you are
indifferent between A and B. What does this tell you about your ß
and ∂? (5 points)
(c) As a matter of fact, at time 0, you are indifferent between B
and C. What does this tell you about your ß and ∂?
(5 points)
(d) Combining the results of (b) and (c), compute your ß and ∂?
(5 points)
zero but strictly smaller than one. At time 0, you are given
the choice between the following three options: A (3 utiles at
time 0), B (4 utiles at time 1), and C
(5 utiles at time 2).
(a) Suppose that you discount the future exponentially and that
you are indifferent between A and B at time 0. What does this tell
you about your ∂? (5 points)
(b) For all the remaining questions, suppose that you discount the
future hyperbolically. As a matter of fact, at time 0, you are
indifferent between A and B. What does this tell you about your ß
and ∂? (5 points)
(c) As a matter of fact, at time 0, you are indifferent between B
and C. What does this tell you about your ß and ∂?
(5 points)
(d) Combining the results of (b) and (c), compute your ß and ∂?
(5 points)