Niguez, T M and Paya, I and Peel, D and Perote, J (2011) On the stability of the CRRA utility under high degrees of uncertainty. Working Paper. The Department of Economics, Lancaster University.
Economic growth models under uncertainty and rational agents with CRRA utility have been shown to provide quite fragile explanations of consumers.choice as equlib- rium comsumption paths (expected utility) are drastically dependant on distributional assumptions. We show that assuming a SNP distribution for random consumption provides stability to general equilibrium models as expected utility exists for any value of the marginal rate of substitution over time.
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