a. Sehrish is a human. Ahmad doubts this. He says she must be an Econ, with...
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a. Sehrish is a human. Ahmad doubts this. He says she must be an Econ, with stable preferences and exponential discounting. He asks her, what amount tomorrow (in PKR) would make you indifferent between receiving PKR 100 today or that amount tomorrow? She says PKR 120. What is Sehrish's discount factor assuming Ahmad is correct about her being an Econ? b. With this daily discount factor, what will be the amount in one year (365 days) will make Sehrish indifferent with PKR 100 today. Is this a reasonable amount? c. Sehrish convinces Ahmad that she would, in fact, be willing to accept a much lower amount of money than the one you derived in (b) instead of PKR 100 today. Ahmad calculates that she may be a quasi-hyperbolic discounter, with B = 0.85. What would be your answer to (b) if we assume quasi-hyperbolic discounting? Is this a more reasonable amount? Why? [For quasi hyperbolic, formula converts to: log (38) = log (Y/X)/t] a. Sehrish is a human. Ahmad doubts this. He says she must be an Econ, with stable preferences and exponential discounting. He asks her, what amount tomorrow (in PKR) would make you indifferent between receiving PKR 100 today or that amount tomorrow? She says PKR 120. What is Sehrish's discount factor assuming Ahmad is correct about her being an Econ? b. With this daily discount factor, what will be the amount in one year (365 days) will make Sehrish indifferent with PKR 100 today. Is this a reasonable amount? c. Sehrish convinces Ahmad that she would, in fact, be willing to accept a much lower amount of money than the one you derived in (b) instead of PKR 100 today. Ahmad calculates that she may be a quasi-hyperbolic discounter, with B = 0.85. What would be your answer to (b) if we assume quasi-hyperbolic discounting? Is this a more reasonable amount? Why? [For quasi hyperbolic, formula converts to: log (38) = log (Y/X)/t]
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