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A. Time consistent. B. Time inconsistent but naïve. C. Time inconsistent but sophisticated. (Hint: write out all possible choices and calculate utility overall possible choices)

A. Time consistent. B. Time inconsistent but naïve. C. Time inconsistent but sophisticated. (Hint: write out all possible choices and calculate utility overall possible choices)

Calculus For The Life Sciences
Calculus For The Life Sciences
2nd Edition
ISBN:9780321964038
Author:GREENWELL, Raymond N., RITCHEY, Nathan P., Lial, Margaret L.
Publisher:GREENWELL, Raymond N., RITCHEY, Nathan P., Lial, Margaret L.
Chapter12: Probability
Section12.3: Conditional Probability; Independent Events; Bayes' Theorem
Problem 81E
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Question 3: Suppose that life has three periods: youth, middle age, and old age. In every period you decide whether to do drugs (“hit”) or not ("refrain"). The utility of hitting depends on whether you are addicted ("hooked") or not. If you are not hooked, the utility from hitting is 10 and the utility from refraining is 0. If you are hooked, the utility from hitting is -8 and the utility from refraining is -25. In youth, you are not hooked; after that, you are hooked just in case you hit in the preceding period. Assume 8 = 1 and ẞ = 0.5. What do you do if you are: A. Time consistent. B. Time inconsistent but naïve. C. Time inconsistent but sophisticated. (Hint: write out all possible choices and calculate utility overall possible choices)
Transcribed Image Text:Question 3: Suppose that life has three periods: youth, middle age, and old age. In every period you decide whether to do drugs (“hit”) or not ("refrain"). The utility of hitting depends on whether you are addicted ("hooked") or not. If you are not hooked, the utility from hitting is 10 and the utility from refraining is 0. If you are hooked, the utility from hitting is -8 and the utility from refraining is -25. In youth, you are not hooked; after that, you are hooked just in case you hit in the preceding period. Assume 8 = 1 and ẞ = 0.5. What do you do if you are: A. Time consistent. B. Time inconsistent but naïve. C. Time inconsistent but sophisticated. (Hint: write out all possible choices and calculate utility overall possible choices)
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