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Compute an arrow-debreu equilibrium

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Reference no: EM13887990

Consider an economy with two consumers, A and B, and two states, 1 and 2. Each consumer has a von Neumann-Morgenstern utility function for lotteries of money. For each consumer, the utility of x units of money is √x, and each consumer believes that each state occurs with probability 1/2. Consumer A is endowed with $2 in state 1 and $4 in state 2. Consumer B is endowed with $1 in state 1 and $10 in state 2. Compute an Arrow-Debreu equilibrium for this example.

Reference no: EM13887990

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