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.

Principles of Microeconomics

7th Edition

ISBN:9781305156050

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter22: Frontiers Of Microeconomics

Section: Chapter Questions

Problem 6PA

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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 ut (1) = 0, where the one in the brackets denotes that he is mowing the lawn. = Now suppose Darcy is a hyperbolic discounter with & 1 and 3 = 0.65. Find Darcy's preferred period to mow the lawn a) in period 1, b) in period 2, if he has not done it previously, and c) in period 3, if he has not done it…
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