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Duesenberry equilibrium and heterogenous agents. (English) Zbl 1448.91285

Summary: We define an intertemporal equilibrium where agents optimize a functional of utility on consumption and final wealth on nominal terms as proposed by [Londoño, Jaime A., J. Appl. Probab., 46 (2009), pp. 55-70]. The equilibrium obtained is a Duesenberry equilibrium in the sense that at the optimal choices, heterogeneous agents have utility values for consumption and wealth that can be seen as a functional on utility on relative consumption and wealth (relative income hypothesis). We characterize these markets under a weak condition, provide existence and uniqueness results, and develop some simple examples. Also, we show the behavior of the proposed model to explain classical puzzles, and we suggest a possible extension. The theoretical framework used is a generalization of markets when the processes are Brownian flows on manifolds.

MSC:

91G15 Financial markets
91G10 Portfolio theory
91B52 Special types of economic equilibria
91B69 Heterogeneous agent models

Software:

DiffProc; Sim.DiffProc; R
PDFBibTeX XMLCite
Full Text: DOI

References:

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