HETEROGENEOUS RISK ATTITUDES IN A CONTINUOUS‐TIME MODEL*

Chiaki Hara ()

The Japanese Economic Review, 2006, vol. 57, issue 3, 377-405

Abstract: We prove that every continuous‐time model in which all consumers have time‐homogeneous and time‐additive utility functions and share a common probabilistic belief and a common discount rate can be reduced to a static model. This result allows us to extend some of the existing results of the representative consumer and risk‐sharing rules in static models to continuous‐time models. We show that the equilibrium interest rate is lower and more volatile than in the standard representative consumer economy, and that the individual consumption growth rates are more dispersed than in the absence of uncertainty.

Date: 2006
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https://doi.org/10.1111/j.1468-5876.2006.00377.x

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Working Paper: Heterogeneous Risk Attitudes in a Continuous-Time Model (2005)
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