2. A simple Search and Money Model. Let a =0.50, B=0.25, r=0.50, H = 0.25, I = 0.25, U – € = 10. As in the Appendix of L

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2 A Simple Search And Money Model Let A 0 50 B 0 25 R 0 50 H 0 25 I 0 25 U 10 As In The Appendix Of L 1 (58.53 KiB) Viewed 44 times

2. A simple Search and Money Model. Let a =0.50, B=0.25, r=0.50, H = 0.25, I = 0.25, U – € = 10. As in the Appendix of Lecture 2, the values of being a 2 producer, commodity holder and money holder are given by Vo = (4.)V, = rta Vm 1-e), A + BC Vi =( -)(U - €), 1- BD C + AD 1- BD with B(1 – ur? Burn* A= B=- r+B(1 - MxPGa) + Burn* ? r+B(1 – ux?(ta) + Buzn* C= B(1 – u).XII D=C(__). r+B(1 – u). Il rta Compute the values Vo, Vi, and Vm for (i) II 0.20,7* 0; (ii) II = 0.20, 7* 1; (iii) II = 0.30, T* = 0; and (iv) II = 0.30, 7* = 1. What is the optimal 7* for each II? Explain the results in less than 4 LINES). rta = = =