A decision maker is given a series of choices involving risk and time delays. You observe the following choice: (100₀, 0.8; 0₀) 100₁, where subscripts indicate years.

(a) Derive the discount factor between periods 0 and 1 assuming discounted expected utility (DEU) with exponential discounting.

(b) Suppose that we also observe (100₀, 0.6; 0₀) 75₁. Is this decision maker risk-averse, risk-neutral, or risk-seeking? Explain your reasoning. (Hint: Use the discount factor you derived above.)

(c) Now suppose that we observe (100₁, 0.75; 0₁) 1083. Given your answers to (a) and (b), does this decision maker display constant discounting?