Question 3: Suppose that life has three periods: youth, middle age, and old age. In every periodyou decide whether to do drugs (“hit”) or not ("refrain"). The utility of hitting depends onwhether you are addicted ("hooked") or not. If you are not hooked, the utility from hitting is 10 and theutility from refraining is 0. If you are hooked, the utility from hitting is -8 and the utility from refraining is-25. In youth, you are not hooked; after that, you are hooked just in case you hit in the precedingperiod. Assume 8 = 1 and ẞ = 0.5. What do you do if you are:A. Time consistent.B. Time inconsistent but naïve.C. Time inconsistent but sophisticated.(Hint: write out all possible choices and calculate utility overall possible choices)

Optimal Decisions for Each Scenario:A. Time Consistent:A time-consistent person maximizes the total…

Answered: A. Time consistent. B. Time…

MATLAB: An Introduction with Applications

6th Edition

ISBN:9781119256830

Author:Amos Gilat

Publisher:Amos Gilat

Chapter1: Starting With Matlab

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A. Time consistent. B. Time inconsistent but naïve. C. Time inconsistent but sophisticated. (Hint: write out all possible choices and calculate utility overall possible choices)