
on Dynamic General Equilibrium 
By:  sunanda roy (drake university) 
Abstract:  The paper studies asset prices and capital accumulation in a monetary economy with nondiversifiable idiosyncratic risks (incomplete markets). A government issued unbacked currency is introduced into agent's preferences in a dynamic GEI (General Equilibrium with Incomplete market) model with CARA preferences and normal disturbances. Closed form expressions for equlibrium allocations and prices are derived under finite and infinite horizons. The paper addresses several monetary issues. In particular, money is shown to be neutral but not superneutral at the steady state. The rate of inflation is shown to adversely affect the steady state capital stock under some situations. Finally the Friedman rule is shown to be nonoptimal for some economies. 
JEL:  C6 D5 D9 
Date:  2005–08–09 
URL:  http://d.repec.org/n?u=RePEc:wpa:wuwpge:0508002&r=dge 
By:  Erio Castagnoli (Bocconi University, Italy); Marco LiCalzi (University of Venice, Italy) 
Abstract:  This paper advances an interpretation of Von Neumann–Morgenstern’s expected utility model for preferences over lotteries which does not require the notion of a cardinal utility over prizes and can be phrased entirely in the language of probability. According to it, the expected utility of a lottery can be read as the probability that this lottery outperforms another given independent lottery. The implications of this interpretation for some topics and models in decision theory are considered. 
Keywords:  expected utility, cardinal utility, benchmark, risk attitude, stochastic dominance 
JEL:  C7 D8 
Date:  2005–08–08 
URL:  http://d.repec.org/n?u=RePEc:wpa:wuwpga:0508004&r=dge 