In a heterogeneous agents economy under quasilinear preferences, if preferences are unidirectional, the pooling equilibrium may exist. If so, it is Pareto optimal; if not, the separating equilibrium (which is Pareto optimal) may or may not exist depending on preferences. If the preferences are multidirectional, the pooling equilibrium always exist and is Pareto optimal.
All Science Journal Classification (ASJC) codes
- Economics and Econometrics