中级金融理论补充习题答案.pdf

Intermediate Financial Theory Danthine and Donaldson Solutions to Additional Exercises 1 Chapter 1 1.6. Consider a two agent –two good economy. Assume well-behaved utility functions (in particular, indifference curves dont exhibit flat spots). At a competitive equilibrium, both agents maximize their utility given their budget constraints. This leads each of them to select a bundle of goods corresponding to a point of tangency between one of his or her indifference curves and the price line. Tangency signifies that the slope of the IC and the slope of the budget line (the price ratio) are the same. But both agents face the same market prices. The slope of their indifference curves are thus identical at their respective optimal point. Now consider the second requirement of a competitive equilibrium: that market clear. This means that the respective optimal choices of each of the two agents correspond to the same point of the Edgeworth-Bowley box. Putting the two elements of this discussion together, we have that a competitive equilibrium is a point in the box corresponding to a feasible allocation where both agents’ indifference curves are tangent to the same price line, have the same slope, and, consequently, are tangent to one another. Since the contract curve