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The exponential discounting model assumes that an agent's utility looks like: T U = Est-lu(ct) t =1 = u(c1) + bu(c2) + 82u(c3) + ...
The exponential discounting model assumes that an agent's utility looks like: T U = Est-lu(ct) t =1 = u(c1) + bu(c2) + 82u(c3) + ... + 87-lu(CT) (a) Explain the above above equation. What does o represent? (b) Does a smaller o mean the agent is more patient or more impatient? (c) How is the B - 6 discounting model different from the exponential discounting model? (d) Assume an agent's utility follows the B - 6 discounting model. Assume that u(x) = x. Suppose today is t = 1. Suppose we know that the agent is indifferent between $100 in t = 2 and $120 in t = 3. Calculate the agent's o (e) Suppose additionally the agent is indifferent between $100 today and $140 in t = 2. Calculate the agent's 6
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