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Problem 21 Suppose Darcy has promised to mow his mum's lawn, either this Saturday (t-1), Saturday week (t=2), the Saturday in a fortnight (t-3), or on the Saturday after this (t-4). He is a season-ticket holder of the local football team Crows Power. So he will miss one of the games on the next four Saturdays. The opponents are getting more attractive to watch each week. So the contemporaneous utilities for going to the games (where the subscript denotes the period and the zero in brackets that he is not mowing the lawn in this period) are: u₁ (0) 10. u₂ (0) 15. us (0) = 20, and us (0) = 25. - On the Saturday t, he mows his mum's lawn, he will miss the game and get a utility of u (1) = 0. where the one in the brackets denotes that he is mowing the lawn. 4 Now suppose Darcy is a hyperbolic discounter with 8 1 and 3= 0.65. Suppose, Darcy is at sophisticated hyperbolic discounter. Explain, what that means. Which action (mow the lawn now or go to the next period) is he going to choose in a) period 3 b) period 2 and c) in period 1.

Problem 21 Suppose Darcy has promised to mow his mum's lawn, either this Saturday (t-1), Saturday week (t=2), the Saturday in a fortnight (t-3), or on the Saturday after this (t-4). He is a season-ticket holder of the local football team Crows Power. So he will miss one of the games on the next four Saturdays. The opponents are getting more attractive to watch each week. So the contemporaneous utilities for going to the games (where the subscript denotes the period and the zero in brackets that he is not mowing the lawn in this period) are: u₁ (0) 10. u₂ (0) 15. us (0) = 20, and us (0) = 25. - On the Saturday t, he mows his mum's lawn, he will miss the game and get a utility of u (1) = 0. where the one in the brackets denotes that he is mowing the lawn. 4 Now suppose Darcy is a hyperbolic discounter with 8 1 and 3= 0.65. Suppose, Darcy is at sophisticated hyperbolic discounter. Explain, what that means. Which action (mow the lawn now or go to the next period) is he going to choose in a) period 3 b) period 2 and c) in period 1.

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
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Problem 2 Suppose Darcy has promised to mow his mum's lawn, either this Saturday (t-1), Saturday week (t=2), the Saturday in a fortnight (t=3), or on the Saturday after this (t-4). He is a season-ticket holder of the local football team Crows Power. So he will miss one of the games on the next four Saturdays. The opponents are getting more attractive to watch each week. So the contemporaneous utilities for going to the games (where the subscript denotes the period and the zero in brackets that he is not mowing the lawn in this period) are: u₁ (0) 10. u₂ (0) 15. u3 (0) 20, and u4 (0) = 25. = - On the Saturday t, he mows his mum's lawn, he will miss the game and get a utility of u (1) = 0. where the one in the brackets denotes that he is mowing the lawn. h Now suppose Darcy is a hyperbolic discounter with 81 and 8 = 0.65. Suppose, Darcy is a sophisticated hyperbolic discounter. Explain, what that means. Which action (mow the lawn now or go to the next period) is he going to choose in a) period 3 b) period 2 and c) in period 1.
Transcribed Image Text:Problem 2 Suppose Darcy has promised to mow his mum's lawn, either this Saturday (t-1), Saturday week (t=2), the Saturday in a fortnight (t=3), or on the Saturday after this (t-4). He is a season-ticket holder of the local football team Crows Power. So he will miss one of the games on the next four Saturdays. The opponents are getting more attractive to watch each week. So the contemporaneous utilities for going to the games (where the subscript denotes the period and the zero in brackets that he is not mowing the lawn in this period) are: u₁ (0) 10. u₂ (0) 15. u3 (0) 20, and u4 (0) = 25. = - On the Saturday t, he mows his mum's lawn, he will miss the game and get a utility of u (1) = 0. where the one in the brackets denotes that he is mowing the lawn. h Now suppose Darcy is a hyperbolic discounter with 81 and 8 = 0.65. Suppose, Darcy is a sophisticated hyperbolic discounter. Explain, what that means. Which action (mow the lawn now or go to the next period) is he going to choose in a) period 3 b) period 2 and c) in period 1.
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