Jim is procrastinating. He needs to work on a problem set for Econ 119, but because of his

busy social calendar he has a decision to make. There are three Zoom parties in the next

three days, and Jim must choose one of them to skip so that he can write the exam. Party

A is today, B is tomorrow, and C is the next and nal day. Jim's instantaneous utility from

each party is as follows:

U(A) = 5; U(B) = 4; U(C) = 7: (1)

On the day Jim skips a party to write the exam, he gets zero utility. First assume that Jim

has time consistent preferences (exponential discounting) with = 1.

a) Which party will Jim skip?

Now assume that Jim discounts according to the beta-delta model with = 1 and some

2 (0; 1).

b) For what range of will Jim display time inconsistency (that is, making a plan but failing

to stick to it)?

c) Fix = 1

2 . Say that each unit of utility is worth $10 to Jim, and that he is sophisticated.

From the perspective of today, how much would he be willing to pay for a commitment

device that guaranteed he would stick the plan he makes today?

d) In c) we assumed that Jim was sophisticated. Brie

y explain what it means in this

context for a DM to be sophisticated vs. naive and why it matters for behavior.