20 points) Meghan lives from Period 0 through Period 5. In each period, starting from Period 1, she has the option to organize the files on her computer, or not. If she never organizes her files, she receives a utility of u = 0 forever. If she does organize her files, she receives an immediate disutility of u = 40 from the 40 minutes of effort that she exerts that day. For all future periods, she receives a utility of u = 30, for the thirty minutes of time that she saves from having organized files. Assume = 1 and = 1 2 . (a) In Period 0, Meghan plans for the future. In what period does she wish to fix her computer? (b) Period 1 rolls around, and Meghan has three choices available: (1) don't fix computer, (2) fix computer, and (3) plan to fix tomorrow. Assuming Meghan is naive, when will she do the task? 10

(c) If we observed Meghan's life-course, how might we interpret her preferences. Ex- plain how this might be related to lifelong alcohol or tobacco addictions, obesity, or credit card debt. (d) In Period 1, if Meghan were given a choice of fixing the computer now or never, would she do the task? (e) Describe a libertarian paternalistic policy that would help Meghan. Will it hurt those with = 1 much?