Intertemporal strategic investment-consumption model: An example

Alex Barrachina () and Eduardo Jiménez-Fernández ()
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Alex Barrachina: LEE and Department of Economics, Universitat Jaume I, Castellón, Spain
Eduardo Jiménez-Fernández: Department of Economics, Universitat Jaume I, Castellón, Spain

No 2016/13, Working Papers from Economics Department, Universitat Jaume I, Castellón (Spain)

Abstract: In this paper we analyze the effect of the proportional profit-sharing rule on investment and consumption decisions in a two-period economy. We provide a particular example of an intertemporal consumption model with k = 2 agents in which they have the opportunity to invest in a project, the profit from which is shared by all the agents according to their percentage participation. We show that the equilibrium investment is unique and in pure strategies but not Pareto efficient.

Keywords: Proportional profit-sharing rule; Intertemporal consumption; Consumption-investment decisions; Strategic investment; Nash equilibrium (search for similar items in EconPapers)
JEL-codes: C72 D1 D9 (search for similar items in EconPapers)
Pages: 12 pages
Date: 2016
New Economics Papers: this item is included in nep-cdm and nep-gth
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Persistent link: https://EconPapers.repec.org/RePEc:jau:wpaper:2016/13

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