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Assume that your l3 and a are both strictly greater than zero but strictly smaller than one. At time D, you are given the choice
Assume that your l3 and a are both strictly greater than zero but strictly smaller than one. At time D, you are given the choice between the following three options: A {3 utiles at time Cl], E {If-i utiles at time l}, and C {5 utile at time 2}. [a]! Suppose that you discount the future exponentially and that you are indifferent between A and E?- at time i]. What does this tell you about your 3? {5 points] [b] For all the remaining questions. suppose that you discount the future hyperbolically. As a matter of fact. at time D, you are indifferent between A and B. What does this tell you about your i3 and a? [5 1ooints]I {c} As a matter of fact; at time ID, you are indifferent between El and C. What does this tell you about your l3 an: a? {5 points] [d] Combining the results of {b} and to}, compute your B and a? [5 points}
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