387hw4anssp07_fig

# 387hw4anssp07_fig - ECO 387: Dynamic Contracts, Spring...

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Unformatted text preview: ECO 387: Dynamic Contracts, Spring 2007. Department of Economics, University of Texas. Instructor: Dean Corbae Solution Problem Set #4 - Figures Value Function P(V) 20 P(V) 10 Pmin(V) Pmax(V) 0 -10 -20 -30 -40 -50 -60 -70 -80 -7 -6 -5 -4 -3 Initial Value (V) -2 -1 0 Figure 1: Value Function. 1 Future Promised Utility w(V) 0 wl(V) wh(V) -1 45 line -2 -3 -4 -5 -6 -7 -7 -6 -5 -4 -3 Initial Value (V) -2 -1 0 Figure 2: Promised Values. Promised Utility w(V) minus Current V 0.5 wl(V)-V wh(V)-V 0.4 0.3 0.2 0.1 0 -0.1 -0.2 -7 -6 -5 -4 w-V -3 -2 -1 0 Figure 3: Promised Values (Deviation from Current V ). 2 Transfers b(V) 7 bl(V) 6 bh(V) 5 4 3 2 1 0 -1 -2 -7 -6 -5 -4 -3 Initial Value (V) -2 -1 0 Figure 4: Transfers. Value of Incentive Constraints 0.7 C(h,l)>=0 C(l,h)>=0 0.6 0.5 0.4 0.3 0.2 0.1 0 -0.1 -7 -6 -5 -4 -3 Initial Value (V) -2 -1 0 Figure 5: Incentive Constraints. 3 ...
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## This note was uploaded on 08/06/2008 for the course ECON 387 taught by Professor Corbae during the Spring '07 term at University of Texas at Austin.

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387hw4anssp07_fig - ECO 387: Dynamic Contracts, Spring...

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