Current Preprints
- A Stochastic Equilibrium Economy
with Irreversible Investment
(with M. B. Chiarolla).
A stochastic continuous-time economy on a finite time interval consists of (i) a commodity
producing firm which must decide on cash holdings, employment levels and investment for
capacity expansion, (ii) agents who maximize expected total utility of consumption, of
money holding and of leisure, some of whom are employed by the firm, some facilitate
capacity expansion (“construction”) and some who are retired or on welfare. All agents
participate in a financial market. The money supply (in real terms) is determined
exogenously by the monetary authorities. We show how to construct an equilibrium where
prices (and other parameters) are set so that both the agents and the firm can achieve
their optimal choices and the markets clear.
- Equilibrium in a Production Economy
(with M. B. Chiarolla).
Consider a closed production-consumption economy with multiple agents and multiple
resources. The resources are used to produce the consumption good. The agents derive
utility from holding resources as well as consuming the good produced. They aim to
maximize their utility while the manager of the production facility aims to maximize
profits. With the aid of a representative agent (who has a multivariable utility function)
it is shown that an Arrow-Debreu equilibrium exists. In so doing we establish technical
results that will be used to solve the stochastic dynamic problem (a case where the
General Equilibrium Theory does not apply) elsewhere.
Return to my Home page.