Under a general set of conditions, this economy can be shown to have a suboptimal equilibrium in the absence of any intervention. It is completely analogous to the equilibrium for the two-period model. As in that model, it is straightforward to show that there is a three-way equivalence between competitive equilibria, fixed points of the mapping that sends a path K(t) into S times the solution to〖 P〗_∞(K), and solutions to an equation of the form
D_1V(k, Sk) = 〖0.〗^10 In the infinitehorizon case, this equation consists of a system of differential equations, which can be represented in terms of a phase plane, and a set of boundary conditions.
Under a general set of conditions, this economy can be shown to have a suboptimal equilibrium in the absence of any intervention. It is completely analogous to the equilibrium for the two-period model. As in that model, it is straightforward to show that there is a three-way equivalence between competitive equilibria, fixed points of the mapping that sends a path K(t) into S times the solution to〖 P〗_∞(K), and solutions to an equation of the form D_1V(k, Sk) = 〖0.〗^10 In the infinitehorizon case, this equation consists of a system of differential equations, which can be represented in terms of a phase plane, and a set of boundary conditions.
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