Suppose that there are three movies each in a week. In week 1, we have Mediocre movie that generates 3 utils (unit of utility). In week 2, we have Good movie that generates 5 utils. In week 3, we have Johnny Depp movie that generates 8 utils. Assume that the agent has quasi-hyperbolic discounting with B = 0.5 and & = 1, and that the agent must give up exactly one movie and receive 0 util in that week. (a) If the agent is fully naive, which movie will he/she give up? (b) If the agent is fully sophisticated, which movie will he/she give up?

Suppose that there are three movies each in a week. In week 1, we have Mediocre movie that generates 3 utils (unit of utility). In week 2, we have Good movie that generates 5 utils. In week 3, we have Johnny Depp movie that generates 8 utils. Assume that the agent has quasi-hyperbolic discounting with B = 0.5 and & = 1, and that the agent must give up exactly one movie and receive 0 util in that week. (a) If the agent is fully naive, which movie will he/she give up? (b) If the agent is fully sophisticated, which movie will he/she give up?

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter15: Strategic Games

Section: Chapter Questions

Problem 15.2IP

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