Question: Suppose you observe a person's answer to two decision problems. Problem 1: You are offered $40 today. What is the minimum amount x you demand

Suppose you observe a person's answer to two decision problems. Problem 1: You are offered $40 today. What is the minimum amount x you demand one month from today in order to be willing to give up the S40 now? Answer: x = 52. Problem 2: Your are offered S40 today. What is the minimum amount x you demand one year from today in order to be willing to give up the S40 now? Answer: 560. 1. Demonstrate that the rational model of time preferences is violated for this choice pattern. 2. Derive this individual's Band 6 for the hyperbolic time discounting model. 3. Suppose the utility you get from eating ice cream now is 10 utils. But you pay a cost of -4 utils per hour for the next 4 hours, because it gives you indigestion and makes you feel lethargic. If your hourly Band 6 for this problem are = 6 and 6 = 9,... 1. V What is the total discounted utility of eating ice cream now? 2. What is your total discounted utility now of planning to eat ice cream after lunch tomorrow? 3. Do you eat ice cream now? 4. Do you plan to eat ice cream tomorrow? Suppose you observe a person's answer to two decision problems. Problem 1: You are offered $40 today. What is the minimum amount x you demand one month from today in order to be willing to give up the S40 now? Answer: x = 52. Problem 2: Your are offered $40 today. What is the minimum amount x you demand one year from today in order to be willing to give up the S40 now? Answer: 560. 1. Demonstrate that the rational model of time preferences is violated for this choice pattern. 2. Derive this individual's Band 6 for the hyperbolic time discounting model. 3. Suppose the utility you get from eating ice cream now is 10 utils. But you pay a cost of -4 utils per hour for the next 4 hours, because it gives you indigestion and makes you feel lethargic. If your hourly Band 8 for this problem are = .6 and 8 = 9.... 1. What is the total discounted utility of eating ice cream now? 2. What is your total discounted utility now of planning to eat ice cream after lunch tomorrow? 3. Do you eat ice cream now? 4. Do you plan to eat ice cream tomorrow

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