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Consider a representative agent model that lives for three periods. She has the following utility function. Assume 3 = .9 and o = 2
Consider a representative agent model that lives for three periods. She has the following utility function. Assume 3 = .9 and o = 2 when needed. log (c) + B - 0 + B C3 and receives endowments (y1, y2, Y3). (a) (10 pts) Define equilibrium (b) (10 pts) Write a set of equations that characterizes equilibrium (c) (10 pts) Show the Walras law, where the three market conditions imply the budget constraint (d) (30 pts) Assume (y, y2, Y3)=(100, 100, 100). Compute equilibrium. (e) (20 pts) Assume (y, y2, Y3)=(200, 100, 200). Compute equilibrium. (f) (20 pts) Assume (y, y2, y3)=(100, 200, 300). Compute equilibrium.
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Behavioral Finance Psychology Decision-Making and Markets
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