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Problem 3: A competitive equilibrium in a deterministic exchange economy. (35 points) An endowment economy consists of two types of consumers. Consumers of type 1
Problem 3: A competitive equilibrium in a deterministic exchange economy. (35 points) An endowment economy consists of two types of consumers. Consumers of type 1 order consumption streams of the one good according to ac: Edd 1=o and consumers of type 2 order consumption streams according to where c}: 23 0 is the consumption of type 1' consumer and E (0.1] is a com- mon discount factor. The consumption good is tradable but nonstorable. There are equal numbers of the two types of consumers. The consumer of type 1 is endowed with the consumption sequence =ye The consumer of type 2 is endowed with the consumption sequence 9': : 0 if t is even and 3;? = a if t is odd, where a 5 \"(1 + 131). 1. Dene an Arrow-Debreu competitive equilibrium. (5 points} 2. Compute the Arrow-Debreu competitive equilibrium. (10 points) 3- Compute the time-U wealth of the two types of conswners using the com- petitive equilibrium prices. {5 points] 4- Dene a sequential competitive equilibrium. {5 points) 5- Compute the sequential competitive equilibrium- {10 points}
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