Question
Consider a two-consumer, two-period economy. Each consumer owns 1 unit of the consumption good in both periods. The utility of consumerAfrom consumption path (xA1, xA2)
Consider a two-consumer, two-period economy. Each consumer owns 1 unit of the consumption good in both periods. The utility of consumerAfrom consumption path (xA1, xA2) is lnxA1+ lnxA2, and the utility of consumerBfrom consumption path (xB1, xB2) is (1)lnxB1+lnxB2, where 01. Notice that consumerAdoes not discount future consumption, whereas consumerBcan either have a preference for current or future consumption (depending on whether1/2or1/2, respectively).
a) Find Pareto Set for the economy
b) How does the Pareto Set depend on ?
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Auditing Cases An Active Learning Approach
Authors: Mark S. Beasley, Frank A. Buckless, Steven M. Glover, Douglas F. Prawitt
2nd Edition
9781266566899
