Old MathJax webview

Old MathJax webview

Exercise 8.12 Exponential discounting, cont. Suppose instead that 8 = 0.1. (a) Compute the utility of each of the four utility streams from the point of view of t= 0. b) What would you choose if given the choice between all four? What if you had to choose between a, b, and c? ( S. Table 8.2 Simple time-discounting problem t=0 t=1 1 t=2 3 d 4 3 4 UC) = up + +8u, = = 1 + 2.7 + 3.24 = ity stream is evaluated from t= 0. If so, U(a) = v= 1, U(b) = du = 0.9 * 3= 2.7, Example 8.11 Exponential discounting Suppose that 8=0.9, and that each util- = 8u = 0.92 * 4 = 3.24, and U(d) - 6.94. Hence, if given the choice between all four alternatives, you would choose d. If the choice between a, b, and c, you would choose c. Exercise 8.12 Exponential discounting, cont. (a) Compute the utility of each of the four utility streams from the point of view of t=0. (b) What would you choose if given the choice between all four? (c) What if you had to choose between a, b, and c? given Suppose instead that 8 = 0.1. = Table 8.2 Simple time discounting problem t=0 t=1 t=2 b 1 3 d 4. 4 3 = Example 8.11 Exponential discounting Suppose that 8 = 0.9, and that each util ity stream is evaluated from t= 0. If so, U(a) = u. = 1, U(b) = 8u = 0.9* 3 = 2.7, (c) = 8_u2 = 0.92 * 4 = 3.24, and U(d) = 10 + ou, + 8uz = 1 + 2.7 + 3.24 U d u , 1 = 6.94. Hence, if given the choice between all four alternatives, you would choose d. If given the choice between a, b, and c, you would choose c. . Exercise 8.12 Exponential discounting, cont. Suppose instead that 8 = 0.1. (a) Compute the utility of each of the four utility streams from the point of view of t= 0. (b) What would you choose if given the choice between all four? (c) What if you had to choose between a, b, and c? a, Exercise 8.12 Exponential discounting, cont. Suppose instead that 8 = 0.1. (a) Compute the utility of each of the four utility streams from the point of view of t= 0. b) What would you choose if given the choice between all four? What if you had to choose between a, b, and c? ( S. Table 8.2 Simple time-discounting problem t=0 t=1 1 t=2 3 d 4 3 4 UC) = up + +8u, = = 1 + 2.7 + 3.24 = ity stream is evaluated from t= 0. If so, U(a) = v= 1, U(b) = du = 0.9 * 3= 2.7, Example 8.11 Exponential discounting Suppose that 8=0.9, and that each util- = 8u = 0.92 * 4 = 3.24, and U(d) - 6.94. Hence, if given the choice between all four alternatives, you would choose d. If the choice between a, b, and c, you would choose c. Exercise 8.12 Exponential discounting, cont. (a) Compute the utility of each of the four utility streams from the point of view of t=0. (b) What would you choose if given the choice between all four? (c) What if you had to choose between a, b, and c? given Suppose instead that 8 = 0.1. = Table 8.2 Simple time discounting problem t=0 t=1 t=2 b 1 3 d 4. 4 3 = Example 8.11 Exponential discounting Suppose that 8 = 0.9, and that each util ity stream is evaluated from t= 0. If so, U(a) = u. = 1, U(b) = 8u = 0.9* 3 = 2.7, (c) = 8_u2 = 0.92 * 4 = 3.24, and U(d) = 10 + ou, + 8uz = 1 + 2.7 + 3.24 U d u , 1 = 6.94. Hence, if given the choice between all four alternatives, you would choose d. If given the choice between a, b, and c, you would choose c. . Exercise 8.12 Exponential discounting, cont. Suppose instead that 8 = 0.1. (a) Compute the utility of each of the four utility streams from the point of view of t= 0. (b) What would you choose if given the choice between all four? (c) What if you had to choose between a, b, and c? a