Suppose that you discount the future hyperbolically. Assume that both B and 8 are strictly greater than zero but strictly smaller than one. At t = 0, you are given the choice between the following three options: a (1 utile at t= 0), b (2 utiles at t = 1), and c (3 utiles at t = 2). As a matter of fact, at t = 0 you are indifferent between a and b and between b and c. (a) Compute B and 8. (b) Suppose, in addition, that at t = 0 you are indifferent between cand d (x utiles at t = 3). What is x?

Suppose that you discount the future hyperbolically. Assume that both B and 8 are strictly greater than zero but strictly smaller than one. At t = 0, you are given the choice between the following three options: a (1 utile at t= 0), b (2 utiles at t = 1), and c (3 utiles at t = 2). As a matter of fact, at t = 0 you are indifferent between a and b and between b and c. (a) Compute B and 8. (b) Suppose, in addition, that at t = 0 you are indifferent between cand d (x utiles at t = 3). What is x?

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter7: Uncertainty

Section: Chapter Questions

Problem 7.7P

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