Assignment #6.pdf - Assignment 6 Behavioral Economics Economics 4374 due October 4 2018 on Blackboard(before class 1 Solve There are three little pigs

Assignment #6.pdf - Assignment 6 Behavioral Economics...

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Assignment 6 Behavioral Economics: Economics 4374 due October 4, 2018 on Blackboard (before class) 1 Solve There are three little pigs, Luke, Kethan, and Arjun. Each of the three pigs lives for five periods, 1, 2, 3, 4, and 5, and is a hyperbolic discounter as introduced in class. In period 1, Luke and Kethan have to decide whether to build a house of bricks or of straw (the market is out of sticks). Building a house of straw has no instantaneous utility cost (it takes no effort), but building a house of bricks has an instantaneous utility cost of 3 (it requires some effort). Every day the three little pigs get utility from rolling around in the mud near the house they live in. This includes the first period, in which they get to roll around in the mud after houses have been built. But how much utility they get depends on whether they are safe from the big bad wolf, and this in turn depends on what their house is made of. If a pig
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  • Fall '17
  • Willa Friedman

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