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Many people display something like hyperbolic discounting. Some businesses thrive on supporting this sort of short-term excess. For example, several establishments offer payday loans−short-term loans with ultrahigh interest rates designed to be paid off the next time the person is paid.
a) Suppose you were considering opening such a payday loan establishment. Given that hyperbolic discounters often fail to follow through on plans, how could you structure the loans to ensure payment? Use the quasi-hyperbolic model to make your argument. present bias: not gonna have $ to pay back
b) The absolute-magnitude effect suggests that people are much closer to time consistency with regard to larger amounts. How might this explain the difference in the structure of consumer credit (or short-term loans) and banks that make larger loans?
c) Lotteries often offer winners an option of receiving either an annual payment of a relatively small amount that adds up to the full prize over a number of years or a one-time payment at a steep discount. Describe how time inconsistency might affect a lottery winner’s decision. How might the lottery winner view her decision after the passage of time?
A large, well-established home insurance company writes insurance policies to cover losses from fire, theft, and vandalism. In a recent financial review, managers discovered that company performance was lagging behind projections. Do the actuaries ha..
Represent the following game in the extensive form. There are three players, numbered 1, 2, and 3. At the beginning of the game, players 1 and 2 simultaneously make decisions, each choosing between “X” and “Y.” If they both choose “X,” then the game ..
Many industrialized countries such as the United States attempt to seriously restrict immigration of production workers, but are more open to immigrants who are highly-skilled. Why might this be the case? Why is this a problem for developing countrie..
q1. if the aggregate-demand curve is given by the equation p400-2xy and long run aggregate supply100 the long run
Which of the following statements supports how the following event could occur: A drought around the world raises the total revenue that farmers receive from the sale of grain, but a drought only in Kansas reduces the total revenue that Kansas farmer..
What is the value of an investment that will pay investors 8,690 dollars per year for 5 years and will also pay investors an additional 9,650 dollars in 3 year(s) from today if the expected return for the investment is 11.15 percent per year and the ..
How disparate are returns if you win. As disparity increases => marginal benefit increases. Which of these two explanations is correct.
A Case Brief should not exceed 500 words (one single-spaced typed page). It should be written with the assumption that the reader is familiar with the details of the case.
The demand curve for cookies is downward sloping. When the price of cookies is $2, the quantity demanded is 100. If the price rises to $3, what happens to consumer surplus?
What indifference curves and budget constraints to explain how an individual labor supply is affected by qualifying for the TANF program?
What is the basic purpose of the World Trade Organization?
organisational behaviour. Why is the relationship between age and job performance likely to be in issue of increasing importance during the next decade?
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