What are the arrow-debreu commodities in this economy

Reference no: EM131136039

Consider an economy consisting of H households each with a utility function at time t = 0 given by

With β ∈ (0, 1), where ch(t) denotes the consumption of household h at time t. Suppose that u(0) = 0. The economy starts with an endowment of y > 0 units of the final good and has access to no production technology. This endowment can be saved without depreciating or gaining interest rate between periods.

(a) What are the Arrow-Debreu commodities in this economy?

(b) Characterize the set of Pareto optimal allocations of this economy.

(d) Consider an allocation of y units to the households, .

Given this allocation, find the unique competitive equilibrium price vector and the corresponding consumption allocations.

(e) Are all competitive equilibria Pareto optimal?

(f ) Derive a redistribution scheme for decentralizing the entire set of Pareto optimal allocations.

Reference no: EM131136039

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