DURABLE CONSUMPTION AS A STATUS GOOD: A STUDY OF NEOCLASSICAL CASES



The consumer-producer’s problem is, thus, formalized as follows:

max


Γ {u


c + ‘,s Q ɪ a ) + V (ŋ) e βt dt,


(2.8a)


subject to:

a = c δa,

____, _

к = F(к, I) c,

(2.8b)


(2.8c)


and the initial stocks of durable consumption and physical capital, a(0) = aŋ > 0 and
к (0) = ко > 0, where β is the exogenous rate of time preference. To solve the consumer-
producer’s problem, we form the current value Hamiltonian, which is given by:
where
φ and μ are the costate variables corresponding, respectively, to the constraints
(2.8b) and (2.8c). Maximizing equation (2.9), we calculate the following
Hrst order opti-
mality conditions:

c + a, s


+ V(Z) + φ (c δa) + μ [F(к, Z) c] ,


(2.9)


и и           , .1 U4 [c + a, s (г)] s' (г)            ,                           „ .

uc [c + a,s (г)] +                        = μ - φ,                (2.l0a)

e + a

V'(Z) = μFι (k,Z),                               (2.10b)

φ = (β + δ) φ Uc [c + a,s (г)] u [c +‘,'f ,jl s'(г),            (2.10c)

e + a

μ = μ Fk(k,Z)] .                             (2.10d)

The optimality conditions (2.10a)-(2.10d) have a straightforward interpretation. Equation



More intriguing information

1. Stakeholder Activism, Managerial Entrenchment, and the Congruence of Interests between Shareholders and Stakeholders
2. The name is absent
3. Une nouvelle vision de l'économie (The knowledge society: a new approach of the economy)
4. Economie de l’entrepreneur faits et théories (The economics of entrepreneur facts and theories)
5. The name is absent
6. On Social and Market Sanctions in Deterring non Compliance in Pollution Standards
7. The name is absent
8. The name is absent
9. THE WAEA -- WHICH NICHE IN THE PROFESSION?
10. New urban settlements in Belarus: some trends and changes