The Reservation Wage under CARA and Limited Borrowing
A continuous-time sequential job search model with savings and CARA preferences is solved analytically without resorting to unlimited borrowing and real-valued consumption. I isolate the effects of limited borrowing and nonnegative consumption as well as risk-aversion on the reservation wage by using a system of ordinary differential equations.
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- Ken Sennewald & Klaus Wälde, 2006.
"“Itô's Lemma” and the Bellman Equation for Poisson Processes: An Applied View,"
Journal of Economics,
Springer, vol. 89(1), pages 1-36, October.
- Sennewald, Ken & Wälde, Klaus, 2005. ""Ito's Lemma" and the Bellman equation for Poisson processes: An applied view," W.E.P. - Würzburg Economic Papers 58, University of Würzburg, Chair for Monetary Policy and International Economics.
- Ken Sennewald & Klaus Wälde, 2006. "“Itô’s Lemma“ and the Bellman Equation for Poisson Processes: An Applied View," CESifo Working Paper Series 1684, CESifo Group Munich.