Will professor frances learn dropbox

Assignment Help Microeconomics

Reference no: EM132201045

Question: A professor you may know, let's call her Professor Frances, sometimes finishes up work at home on her home computer. She needs access to word and powerpoint files. She can either email these files back and forth to herself or she can use dropbox. It takes 2 minutes to email the file to herself and back again. It takes no time to use dropbox. However, since she has never used dropbox before, she does not have an account or know how to use it. Therefore, the first time she uses dropbox, there is a one time, up-front cost of 5 minutes to set up the account and learn how to use it. Let u(x) = -x, meaning her utility from spending x minutes to do something is just -x. There are 5 time periods, t=0, 1, 2, 3 and 4. She can learn dropbox in any time period. For example, she can learn dropbox in the first period and have costless transfers for the rest of her time. Or she can email in the first period, then learn dropbox in the second and have costless transfers from then on. And so on. I recommend working out this problem in excel. Once you set up the equations, it is effortless to do the calculations. Show your work for all parts. If you use excel, print out the spreadsheet and make sure to indicate the equations.

A) First assume Professor Frances has no problems with self-control: she is an exponential discounter. Let Î´= 0.9. Will Professor Frances learn dropbox? In which time period? How much time total will she spend transferring files (including the setup time for dropbox)? Now suppose Professor Frances is a hyperbolic discounter with Î´=0.9 and Î²=0.5.

B) If she has access to a commitment device in t=0, when (if ever) will she choose to commit herself to learning dropbox? (In other words, on day t=0 when will she choose to commit herself to learning dropbox?) How much time total will she spend transferring files (including the setup time for dropbox)?

C) Suppose there is no viable commitment device. If she is naÃ¯ve, when, if ever, will she learn dropbox? How much time total will she spend transferring files (including the setup time for dropbox)?

D) If she is sophisticated, when, if ever will she learn dropbox and how much time will be spent on file transfer?

E) Discuss the meaning of your results intuitively.

F) Did you answer in Excel? Why or why not?

Reference no: EM132201045

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