We consider a Diamond-type model of endogenous growth in which there are three assets: outside money, government bonds, and equity. Due to productivity shocks, the equity return is uncertain, and risk averse investors require a positive equity premium. Typically, there exist two steady states,...

The effect of the presence of an externality in a general equilibrium scenario is illustrated in a standard Edgeworth box. Assuming utility functions parameterized by the incidence of the externality and taking into account the resource constraints when deriving agents' indifference curves for...

In this paper we use a non-tatonnement dynamic macroeconomic model to study the role of inventories, expectations and wages in the business cycle. Following a restrictive monetary shock, by amplifying spillover effects inventories may imply that the economy converges to a deflationary locally...

A risk averse insurance company which knows the quota of coverage demanded by a client at the status-quo premium but has imperfect information otherwise may choose not to change the premium although an else identical risk neutral company would do so, provided the variance of the company’s...

The paper considers a dynamic macroeconomic model with stochastic quantity rationing. The economy is composed of overlapping-generations consumers, producers and a government who interact in a labor and a consumption goods market. Agents behave optimizing and trade in each period, even when...

We consider a Diamond-type model of endogenous growth in which there are three assets: outside money, government bonds, and equity. Due to productivity shocks, the equity return is uncertain, and risk averse investors require a positive equity premium. Typically, there exist two steady states,...

NONDEGENERATE INTERVALS OF NO-TRADE PRICES FOR RISK-AVERSE TRADERS ABSTRACT. According to the local risk-neutrality theorem an agent who has the opportunity to invest in an uncertain asset does not buy it or sell it short iff its expected value is equal to its price, independently of the...

A risk-averse price-setting firm which knows the quantity demanded at the status quo price but has imperfect information otherwise may choose not to change it although an otherwise identical risk-neutral firm would do so, provided the variance of the firm's subjective probability distribution...

A model is analyzed in which workers' efforts depend positively on the real wage and the unemployment rate. Due to isoelastic demand and constant marginal cost it is optimal for firms to set the output price as a fixed markup over the nominal wage. When demand shocks occur, firms' first response...

The effect of an increase in wage rates on employment and production in a state of Keynesian unemployment was studied by Malinvaud (1977). In his analysis, Malinvaud assumes a deterministic rationing model. We replace this hypothesis by an assumption of stochastic rationing. Transaction...