Why Utility Non-linearly Depends on Money: a Commonsense Explanation
نویسندگان
چکیده
Saving money for retirement: a simpli ed description of the problem. Let us consider a simpli ed version of this situation, when we only have two moments of the time: the current moment of time (when we earn money), and the future moment of time, in which we will not earn money. Suppose that at the present moment, we earn the amount m. Out of this amount, we can save s ≤ m and thus, spend the remaining amount m − s. The saved money is invested; as a result, with interest, in the future, we will have an increased amount k · s, for some constant k > 1. The question is how much money s we shall save, i.e., which amount s ∈ [0,m] we should select.
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