Economics

Time and Risk

Dept. of Economics @ NCKU

Weng, Ming-Hung
 Q1
A $200 wager on next card and
win ($300) on Red
lose bet on Black.

Its EV is?
1. $0; 2. $50; 3. 100; 4; $200
 Q2
+% 0 5 8 10 12 15 20
u(+%) 0 62 82 88 92 98 100
1. +8% (50%) or +12% (50%);
2. +5% (50%) or +15% (50%);
3. +0% (50%) or +20% (50%);
The agent with specified utility function
will prefer investment project ___.
 Q3
+% 0 5 8 10 12 15 20
u(+%) 0 62 82 88 92 98 100
1. +8% (50%) or +12% (50%);
2. +5% (50%) or +15% (50%);
3. +0% (50%) or +20% (50%);
An agent preferring investment project 1 is
considered risk ___
1. averse; 2. neutral; 3. loving
 Q4

now now

As long as monkeys
give discounts (say
later 0.5) to future rewards, later
they will prefer
 Q5
Suppose each marshmallow has a utility of 5.
If a person has a discount rate 0.8 for what is
happening 10 minutes later, he would choose
1. one marshmallow now
2. 2 marshmallows in 10 minutes
3. either one