Consider the Gul-Pesendorfer Model. Alice needs to work on assignment a, which has long utility u(a) = 2 and no temptation utility: v(a) = 0. Consider the following two alternative activities: (i) watching television (t), with u(t) = 0 and v(t) = 1, and (ii) going out with her friends (f), with u(f) = 0 and v(f) = 3. 

 

1. (5 points) What would Alice choose if she only has the choice between doing the assignment and watching television? What is her utility from the menu {a,t}

 

2. (5 points) What would Alice choose if she only has the choice between doing the assignment and going out with her friends? What is her utility from the menu {a, f}? 

 

3. (5 points) What would Alice choose if she has all three options? What is her utility from the menu {a, t, f}? 

 

4. (6 points) Suppose Alice had a choice about the activities she could have available. How would she rank the menus {a}, {t} and {f}? 

 

5. (6 points) How would Alice rank the menus {a}, {a, t}, {a, f}, and {a, t, f}? 

 

6. (6 points) How would Alice rank the menus {t}, {f} and {t, f}? 

 

7. (7 points) How would Alice rank all possible (non-empty) menus relative to each other? 

Answer rating: 100% (QA)

If Alice only has the choice between doing the assignment a and watching television t she would choo... View the full answer