Re: DSE 2013 Paper Discussion

Posted by kangkan on May 18, 2014; 5:31pm
URL: http://discussion-forum.276.s1.nabble.com/DSE-2013-Paper-Discussion-tp7584703p7590119.html

but here the optimization problem will be max x1+Bx2 sub to x+x2/1+r=1/1+r right?this will be linear programming one..will it have an interior solution,?..and lets take a hypo case..lets assume Beta is nearly 1...lets say 0.99999 ...and r=0.75...in this case i wud be better of consuming in period 2 only cuz the the cost of period 1 consumption will be too high...do you think the consumption smoothing objective will apply here?