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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?
Illustrate what trends did Nokia pursue as it designed mobile phone products in the late 1990's.
Krill Electronics is looking for a new rental space for one of its manufacturing lines. The first rental space, on Park Street, requires a 2-year lease with the total cost of the lease ($88901) due at the time of signing. The rental space has annual ..
A market has a demand curve described by P=26-Q, a supply curve described by P=10+Q, and a price ceiling of 12. Calculate the Total Surplus of the market with the price ceiling.
The price in a market is dominated by two firms is affected by the quantities supplied by both firms, Q1 and Q2: P = 100 - (Q1 + Q2). The marginal cost for the two firms is identical and constant and equal to 25. Derive the equations for total revenu..
Elucidate what would be the immediate and long run effects on c, k, and y. Explain by drawing the path of these variables. Consider that you impose the new saving rate.
Suppose that the U.S. the demand for phones is given by P=700-Q that the supply is given by P=200+Q. In Korea suppose the demand is given by P=600-Q and supply is given by P=50 + (Q/2).
Each of the players chooses an (integer) amount between $180 and $300. Both players receive the lower amount. Five dollars are transferred from the player who chose the larger amount to the player who chose the smaller one. Find the Nash equilibria f..
Home price escalation in the U.S. during 2005 fuelled booms in:
The purposes of assessing the consequences of these provisions for strategic decision making.
Illustare what is the maximum amount of new money that can be created in the banking system as a result of this deposit.
More people in high-income countries than in low-income countries tend to believe that rapid rates of economic growth are not desirable. Which of the following best explains what is actually happening to real per capita GDPs of countries?
What is the company -level production function. You are currently using three printing presses and five employees to print 100 sales manuals per hour.
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