2. (Lehr #4.5) It's Dinner Times. Consider the following alternative sequences of dinners over the next three weekends (Loewenstein 1987, 678-679): Alternative A B This weekend Dinner at a fancy French restaurant Eat at home Dinner at a fancy French restaurant Eat at home Next weekend Eat at home Dinner at a fancy French restaurant Eat at home Dinner at a fancy French restaurant Two weekends from now Eat at home Eat at home Fancy lobster dinner Fancy lobster dinner a. Suppose that individual preferences over a sequence of dinners (c1, c2, c3) are represented by a discounted utility function of the form: Ul(e,6,6) = D(1)u(c,) + D(2)u(c,) + D(3)u(c;) where D(k) is some discount function and u(c) is the instantaneous utility function. If A is preferred to B, does the individual prefer X or Y more? b. Ofthe 37 Yale University undergraduates asked to choose between A and B ignoring any possible scheduling conflicts the majority (84%) preferred sequence B to A. The majority (57%) also preferred sequence X to Y. Explain whether the majority preferences support or contradict the model of preferences (4.8). c. Provide psychologically plausible reasons for the majority preferences in part (b). Can you identify an anomaly of intertemporal choice not discussed in the chapter