In a DD model with 3 periods t=0,1,2. Each consumer is endowed with 1 potato at t=0, has probability 1/2 of becoming hungry at t=1 and probability 1/2 of becoming hungry at t=2. Consumer utility is given by u(c)=1-1/c. Storage technology generates a gross return of 1 from period 0 to 1, and return of 1 from period 1 to 2. Investment technology generates a return of 3 from period 0 to period 2. If an investment is liquidated early in period 1, its return is reduced to 0.5.

What's the lifetime happiness of a consumer if ONLY investment is used. Lifetime happiness=_____

Answer rating: 100% (QA)

To calculate the lifetime happiness of a consumer if only investment is used we ... View the full answer