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Sean doesn't like to wait to purchase items that he wants, but Calvin prefers to pay for things he wants in full. They are both planning on buying a video game system. The store is running an offer that consumers can buy the system for $400 or pay $120 per month for four months. Either choice allows the consumer to leave the store with the video game system. Using the discount rate of 2% per month, which payment scheme leaves the consumer better off? If Sean is a hyperbolic discounter and if his per month discount rates are 50% for the first two months and 2% thereafter, which will he prefer?
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