D.prob: Probability of Divorce and Final Consumption Path for a Given...

In mirtaher/TwoPeriodSim: Two period model risk sharing using the collective model

Description

This function calculates the probability of divorce for a given income shock process parameters. In addition, it returns the optimal consumption paths after taking into account the decision to divorce. The decision to divorec could be cooperatively ("c") Non-cooperatively ("n"). In non-cooperative way, each couple compares the expected second period utility between divorec and marriage. The marriage dessolves once one of the couples betetr off to get divorced. In the cooperative way, in a unitary framework, the couple substitute the consumption levels in the state of divore and marraige in the joint utility function with the same sharing rule (i.e. 0.5). They decide to diviorce t=if the collective benefit of divorce outweight the collective utility of staying married. The function also returns the probability that the participations constraints of husband and wife is binding.

Usage

D.prob(sigma_eta_h = param()$sigma_eta_h, rho = param()$rho,
  phi = param()$phi, Consumption = TRUE)

Arguments

Consumption

Returns the optimal consumption path and saving after taking into account the optimal decision divorce. By default it is TRUE

mirtaher/TwoPeriodSim documentation built on May 22, 2019, 11:55 p.m.