Consider the following payoffs
Consider the following payoffs
- x1: $10 on October 1st
- x2: $15 on November 1st
Also consider the following decision-makers, with U(y) = y, initial wealth = 0, and δ capturing a monthly discount factor
- Leo: discounted utility maximizer with δ = 0.5
- Don: discounted utility maximizer with δ = 0.75
- Ralph: beta-delta utility maximizer with δ = 0.5 and β = 0.5
- Mike: beta-delta utility maximizer with δ = 0.75 and β = 0.5
1.1. Fill in the following table based on the discounted utilities or beta-delta utilities generated by the above parameters. Here “Utility of x1 on Aug 1″ corresponds to the utility of receiving $10 on October 1st as assessed by the decision maker on August 1st. [12 points]
| Leo | Don | Ralph | Mike | |
| Utility of x1 on Aug 1 | ||||
| Utility of x2 on Aug 1 | ||||
| Utility of x1 on Sept 1 | ||||
| Utility of x2 on Sept 1 | ||||
| Utility of x1 on Oct 1 | ||||
| Utility of x2 on Oct 1 |
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