New answers tagged

0

In reference to the dynamic planning problem: Non-separable utility means there is habit formation; Time-separable utility by comparison means no habit formation. The important point regarding non-habit formation is that marginal utility depends only on consumption in a single period (periods are separated). Yet when there is habit formation, it matters ...


4

No. Consider the following problem: Each period, one total unit of consumption falls from the sky that can be distributed between the two agents in any way. Their per-period utility is simply how much they consume. We let $\alpha=1/2$. Assume that $\beta_1>\beta_2$; the first agent is more patient. All optimal allocations have a very simple form: The ...


Top 50 recent answers are included