Problem 4 Lara plans to go on a short trip to the Netherlands on one of the next four weekends (T = 4). As she enjoys sunbathing and the weather will be getting better over time, we have v = (15,24, 33, 45). When on vacation, she is not able to take care of her tomato plants at home. The consequences of not watering the plants is more severe, the warmer it is. Accordingly, c = (3,6,9,12). Going on vacation is an action with immediate rewards as it is enjoyable right now, but in late summer Lara might suffer from not being able to harvest tomatoes. Lara has a present bias of ß = and a long-run discount factor 6 = 1.
Problem 4 Lara plans to go on a short trip to the Netherlands on one of the next four weekends (T = 4). As she enjoys sunbathing and the weather will be getting better over time, we have v = (15,24, 33, 45). When on vacation, she is not able to take care of her tomato plants at home. The consequences of not watering the plants is more severe, the warmer it is. Accordingly, c = (3,6,9,12). Going on vacation is an action with immediate rewards as it is enjoyable right now, but in late summer Lara might suffer from not being able to harvest tomatoes. Lara has a present bias of ß = and a long-run discount factor 6 = 1.
MATLAB: An Introduction with Applications
6th Edition
ISBN:9781119256830
Author:Amos Gilat
Publisher:Amos Gilat
Chapter1: Starting With Matlab
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Transcribed Image Text:Problem 4 Lara plans to go on a short trip to the Netherlands on one of the next four weekends
(T = 4). As she enjoys sunbathing and the weather will be getting better over time, we have
v = (15,24, 33, 45). When on vacation, she is not able to take care of her tomato plants at home.
The consequences of not watering the plants is more severe, the warmer it is. Accordingly, c =
(3,6,9, 12). Going on vacation is an action with immediate rewards as it is enjoyable right now,
but in late summer Lara might suffer from not being able to harvest tomatoes. Lara has a present
bias of ß = and a long-run discount factor 6 = 1.
(a) Derive Te, the period in which the TC (no present bias, B = 1) goes on vacation. Explain
the behavior intuitively.
(b) Derive T, the period in which the Naif goes on vacation. Explain the behavior intuitively.
(c) Derive 7, the period in which the Sophisticate goes on vacation. Explain the behavior intui-
tively.
(d) Explain differences in the behavior of TC and Naif with the help of the Present-Bias Effect.
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