Question
Question 5: For the Doing it Now or Later problem (see slides of Lecture 3, p. 29 to 43), consider the exact same payoff structure
Question 5: For the "Doing it Now or Later" problem (see slides of Lecture 3, p. 29 to 43), consider the exact same payoff structure and time preference parameters given in the in-class example, but instead the decision-maker has "partial naivete" (p.20). Assume that his belief on is the average of what he would believe if he was fully sophisticated and what he would believe if he was fully nave.
A. What is the decision-maker's discount function (or timeline) from the "present" perspective?
In the present, what does he believe his "future" discount function (or timeline) will be?
B. When does the partially nave decision-maker write the paper? (Explain the week-by-week reasoning)
C. When does the partially nave decision-maker watch the movie? (Explain the week-by-week reasoning) Week 1 reasoning (backward induction):
D. Give an intuitive explanation for the results in parts B and C.
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