nep-dge New Economics Papers
on Dynamic General Equilibrium
Issue of 2005‒06‒19
two papers chosen by
Christian Zimmermann
University of Connecticut

  1. A theory of endogenous time preference, and discounted utility anomalies By Svetlana Boyarchenko; Sergei Levendorskii
  2. The Lagrange multipliers and existence of competitive equilibrium in an intertemporal model with endogenous leisure By Nguyen Manh Hung; San Nguyen Van

  1. By: Svetlana Boyarchenko (The University of Texas at Austin); Sergei Levendorskii (The University of Texas at Austin)
    Abstract: We explain essentially all known discounted utility anomalies as artefacts of the optimizing behavior of an individual with a time- separable utility function, who perceives a good as a source of a stochastic consumption stream, and believes that she can wait for an optimal moment to buy or sell the good. For this individual, the fair price of the corresponding utility stream is interpreted as an integral of a deterministic utility stream multiplied by certain non-exponential factors which we interpret as endogenous discount factors; the factors are different for gains and losses, and depend on the utility function and underlying uncertainty. We provide analytic expressions and numerical examples for discount factors assuming simple utility functions and gaussian uncertainty.
    Keywords: Time preference, discounted utility anomalies, decision-making under uncertainty, optimal stopping
    JEL: D81 D91 C61 G31
    Date: 2005–06–13
  2. By: Nguyen Manh Hung (CERMSEM); San Nguyen Van (CERMSEM)
    Abstract: This paper proves the existence of competitive equilibrium in a single sector dynamic economy with elastic labor supply. The method of proof relies on some recent results (see Le Van and Saglam [2004]) concerning the existence of Lagrange multipliers in infinite dimensional spaces and their representation as a summable sequence.
    Keywords: Optimal growth model, Lagrange multipliers, competitive equilibrium, elastic labor supply
    JEL: C61 C62 D51 E13 O41
    Date: 2005–01

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