\"John solved 5 true-and-false questions in the exam, and his answers were False
ID: 1218080 • Letter: #
Question
"John solved 5 true-and-false questions in the exam, and his answers were False for all questions. He was surprised, and he felt that he made some mistakes since the professor should choose the correct answer (True or False) just randomly." Which type of discounting (exponential discounting, hyperbolic discounting, or quasi-hyperbolic discounting) can explain the following preferences? Explain the reason. If there are two or more appropriate types, show all of them. Christine prefers "getting $1 million now" to "getting $2 million 2 periods later." Megan prefers "getting $1 million now" to "getting $2 million 2 periods later." She also prefers "getting $2 million 12 periods later" to "getting $1 million 10 periods later." Emily prefers "getting $1 million 10 periods later" to "getting $2 million 12 periods later." She also prefers "getting $2 million 22 periods later" to "getting $1 million 20 periods later." Suppose that there are two lotteries: Lottery A gives you $200 for sure, and Lottery B gives you $410 with a probability 50% (otherwise nothing). In the following cases,Explanation / Answer
5 a. the fist one is an eample of eponential discounting because under exponential discounting a person pefers money sooner rather than a larger sum later.
b.this is an example of hyperbolic discounting because under hyperbolic discounting people prefer a payment now rather than later but if they wait for 10 months to receive a payment they will gladly wait some more time to recieve a larger amount.
c.this example shows both exponential and hyperbolic discounting.Because she prefers the earlier one in the first part even though she coould have got a higher sum if she would have waited for 2 months extra,this shows her time preference so the first part shows exponential discounting.The second part shows hyperbolic discounting as she prefers $2 million later than $1 million earlier
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