In this paper, we investigate how investors who face both equity risk and credit risk would optimally allocate their financial wealth in a dynamic continuous-time setup. We model credit risk through the defaultable zero-coupon bond and solve the dynamics of its price after pricing it. Using...

This paper addresses the issue of optimum population with two concerns : avoiding both the absolute repugnant solution that amounts to giving to an infinite number an infinitesimal amount and the marginal repugnant solution in which equilibrium consumption decresases with income. To avoid these...

We are interested in three related questions: (1) How should accounting prices be estimated? (2) How should we evaluate policy change in an imperfect economy? (3) How can we check whether intergenerational well-being will be sustained along a projected economic programme? We do not presume that...

This paper studies optimal dynamic tax policy under the threat of political reform. A policy will be reformed ex post if a large enough political coalition supports reform; thus, sustainable policies are those that will continue to attract enough political support in the future. We find that...

We develop a simple dynamic model of decision making in the presence of moral constraints. Norm violations induce a temporal feeling of guilt that depreciates with time. Due to endogenous fluctuations of guilt, people exhibit a dynamic inconsistency in social preferences—a behavior we term...

We study the differences between public production and public finance of public goods in a dynamic general equilibrium model. Under public production, public goods are produced by the government. Under public finance, the same amount of public goods is produced by cost-minimizing private...

The authors develop a theoretical model of underdevelopment whirlpools, conduct the analysis of economy development of Russia and the countries of Eastern Europe using the underdevelopment whirlpools methodic, and analysis of opportunities and prospects of economy development of Russia and the...

We introduce a dynamic model of resource-grabbing by status-conscious agents, i.e., agents value not only their absolute consumption levels, but also the relative status within their reference group. We explore the effect of the concern for relative consumption on the growth rate and the welfare...

The OLG model of Allais and Samuelson retains the methodological assumptions of agent optimization and market clearing from the Arrow-Debreu model, yet its equilibrium set has different properties: Pareto inefficiency, indeterminacy, positive valuation of money, and a golden rule equilibrium in...

Evolutionary arguments are often used to justify the fundamental behavioral postulates of competive equilibrium. Economists such as Milton Friedman have argued that natural selection favors profit maximizing firms over firms engaging in other behaviors. Consequently, producer efficiency, and...