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Bauer, Christian (15. March 2009): The Reservation Wage under CARA and Limited Borrowing. Discussion Papers in Economics 2009-8 [PDF, 336kB]


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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