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Bauer, Christian (15. März 2009): The Reservation Wage under CARA and Limited Borrowing. Münchener Wirtschaftswissenschaftliche Beiträge (VWL) 2009-8
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Abstract

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.