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Instead of expected profit maximization, this‘ paper assumes a safety-first objective so that the firm will set a higher price for its product if cost or demand is higher, which has macroeconomic implications, With all firms in the economy as price setters, there is an equilibrium of prices...

No Abstract

Kydland-Prescott (1977) and Calvo (1978) have argued that optimal dynamic plans are time inconsistent in general. It is shown that their demonstrations of this proposition are not valid. However, the proposition is correct because a later optimization problem always drops some condition required...

If the solution to a dynamic optimization problem is interpreted as an equilibrium growth path, then the Harrod instability proposition applies not only to the neoclassical growth model but also to the more recent endogenous growth version.