Behavioral Economics

2. Ann has three days left before an exam. Each day she has a quasi-hyperbolic utility with δ = 1 and β = 0.5. Each day she can either work hard and get a delayed reward of 10, or have fun with an immediate reward of 7. She can work 1, 2, or 3 days and get 10, 20, or 30 in delayed rewards respectively.
Without commitments, Ann will

(A) work every day t = 1,2,3; (B) have fun every day t = 1,2,3; (C) have fun at t = 1,2 and work at t = 3; (D) none of the above.

  1. Suppose that at any t = 1,2,3, she can promise to pay a fine if she does not work hard in the next time period. Suppose that paying the fine has an immediate cost of 10. Then she will make this commitment

(A) at t = 1,2; (B) only at t = 1; (C) only at t = 2; (D) never.

  1. If the fine has an immediate cost 1, then Ann will make the commitment for the next day

"Order a similar paper and get 15% discount on your first order with us
Use the following coupon

Order Now