For the “Doing it Now or Later” problem (see slides of Lecture 3, p. 29 to 43), consider the exact same payoff structure and time preference parameters given in the in-class example, but instead the decision-maker has “partial naivete” (p.20). Assume that his belief on β is the average of what he would believe if he was fully sophisticated and what he would believe if he was fully naïve.

A. What is the decision-maker’s discount function (or timeline) from the “present” perspective?

In the present, what does he believe his “future” discount function (or timeline) will be?

B. When does the partially naïve decision-maker write the paper? (Explain the week-by-week reasoning)

C. When does the partially naïve decision-maker watch the movie? (Explain the week-by-week reasoning) Week 1 reasoning (backward induction):

D. Give an intuitive explanation for the results in parts B and C.

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