In a continuous-time economy with complete markets, we study how the heterogeneity in the individual consumers' risk tolerance and impatience affects the representative consumer's risk tolerance and impatience. We derive some formulas, which indicate that the representative consumer's impatience...

Rational beliefs (in the form of WAMS measures) are expectations which though consistent with empirical observations, may deviate from the true underlying probability measure under which data is generated.We provide results on, as well as a decomposition of, WAMS measures and use this to...

The introduction and widespread use of credit cards increases trading efficiency but, by also increasing the velocity of money, it causes inflation, in the absence of monetary intervention. If the monetary authority attempts to restore pre-credit card price levels by reducing the money supply,...

A univariate real-valued function is said to be completely monotone if it takes positive values and alternate the signs of its higher order derivatives, starting from everywhere negative first derivatives. We prove that the representative consumer's discount factor of a continuous-time economy...

In a continuous-time economy with complete markets, we show how the heterogeneity in the individual consumers' risk attitudes and impatience would affect the representative consumer's counterparts. Specifically, our formulas tell us how his risk tolerance and impatience will change over time,...

In a continuous-time economy with complete markets, we study how the heterogeneity in the individual consumers' risk tolerance and impatience affects the representative consumer's risk tolerance and impatience. We derive some formulas, which indicate that the representative consumer's impatience...

It has been shown in the literature that if the individual consumers have constant but unequal time discount rates, then the representative consumer has discount rates that is a strictly decreasing function of time, just as is the case of hyperbolic discounting. No contribution, however, has so...

We investigate how an increase in transaction costs affect the equilibrium asset prices and allocations. We find a sufficient condition for an increase in transaction costs to increase buying prices, decrease selling prices, decrease the trading volume, and make all active traders worse off. The...

We consider two models of lump sum taxation in pure exchange economy in which the state imposes taxes on (or offers financial aid to) economic agents characterized by their demand functions and initial resources. In the first model the state has its own preferences and uses the collected money...

This paper studies fertility choices and fertility policies when children's earning abilities are random and parents are altruistic. We characterize equilibrium allocations arising in endowment economies with either complete or incomplete markets. Both models can replicate a number of empirical...