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Anaiveconsumerhasquasi-hyperbolicpreferencesU(c1,c2,c3)=c1+0.6(0.5c2+ 0.25c3)inperiod1andU(c2,c3)=c2+0.3c3 inperiod2.Theconsumerreceivesanendow- ment of 1 in each period. In period 2, the consumer can spend 1 on an investment that yields a payoff of
Anaiveconsumerhasquasi-hyperbolicpreferencesU(c1,c2,c3)=c1+0.6(0.5c2+ 0.25c3)inperiod1andU(c2,c3)=c2+0.3c3 inperiod2.Theconsumerreceivesanendow- ment of 1 in each period. In period 2, the consumer can spend 1 on an investment that yields a payoff of 3 next period. The consumer's only investment options are to invest nothing or to invest 1. Determine whether the investment behavior in period 2 matches the planned behavior for period 2 in period 1.
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