Intertemporal optimization An agent lives for two periods in the first period she works and in the second period she is retired The income in coins (salary) for this agent is w 1 0 and the income in coins (national pension) in second period is w 2 The agent has the utility function u log(c 1 ) log(c 2 ) Where c 1 is consumption in the first period and c 2 is consumption in the second period We assume that 0 How do you interpret and what would be reasonable to assume about (besides 0)

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Question: Intertemporal optimization An agent lives for two periods: in the first period she works and in the second period she is retired. The income in

Intertemporal optimization

An agent lives for two periods: in the first period she works and in the second period she is retired. The income in coins (salary) for this agent is w₁> 0 and the income in coins (national pension) in second period is w₂. The agent has the utility function. u = log(c₁) + log(c₂). Where c₁ is consumption in the first period and c₂ is consumption in the second period. We assume that > 0.

How do you interpret and what would be reasonable to assume about (besides > 0).?

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