Average consumer decisions in an economy with heterogeneous subjective discount rates and risk aversion coefficients: the finite horizon case

Alfredo Omar Palafox-Roca () and Francisco Venegas-Martínez
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Alfredo Omar Palafox-Roca: Instituto Politécnico Nacional, Escuela Superior de Economía

Economics Bulletin, 2014, vol. 34, issue 2, 842-849

Abstract: This paper aims to study the behavior of the average rational consumer of an economy populated by heterogeneous agents in a finite horizon framework. Heterogeneity takes into account both the subjective discount rate and risk aversion coefficient. Closed-form solutions for the optimal paths of consumption and capital, of the average consumer, are derived. Moreover, a closed form solution for the economic welfare of the average consumer is obtained.

Keywords: Heterogeneous preferences; subjective discount rate; risk aversion coefficient; consumption decisions; average consumer (search for similar items in EconPapers)
JEL-codes: C6 D9 (search for similar items in EconPapers)
Date: 2014-04-23
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Citations: View citations in EconPapers (2)

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