Consider an economy where there is a single consumption good and two states of na- ture {a,b} and individuals can trade

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Consider An Economy Where There Is A Single Consumption Good And Two States Of Na Ture A B And Individuals Can Trade 1 (70.48 KiB) Viewed 29 times

Consider an economy where there is a single consumption good and two states of na- ture {a,b} and individuals can trade in contingent markets. There are two consumers with preferences and (random) endowments as follows: Agent A: UA (XA(a), x A(b)) = log x A(a) + log x A(6), (ea(a), e^(b)) = (2,3) Α Agent B: UB (XB(a), 2B(b)) = 2B(a) · <3(6), (eb(a), eb(b)) = (0,2) Compute the equilibrium in contingent markets and answer: at equilibrium, what is the consumption of individual A in state b, i.e., x*(6) =? Α α Α = =