Exempel på autarky

• Evidently, autarky is not an absorbing state for the agent in this regime at these parameter values.

• Surplus for each regime when promised utilities are truncated at autarky.

• The proof is immediate from equations (14), the autarky version of (9), and their steady state equivalents.

• In autarky the agent borrows nothing, consumes the output, and chooses effort to maximize expected contemporaneous utility.

• One flaw of using flows lies on the fact that zero capital flows is a necessary but not sufficient condition for financial autarky.

• The smallest incentive-compatible promised utility in this regime is the present discounted value of remaining in autarky permanently.

• The terminal condition incorporates the fact that once discovered, a defecting banker is punished with autarky forever.

• Most results are displayed with the utility range truncated at autarky (the minimum promised utility in the pure-debt regime).

• However, they are better off relative to autarky. 23.

• In particular, defection by a merchant is punished by having the defecting merchant get the payoff from autarky, which is zero.

• In this world, the move from autarky to openness involves the removal of a final distortion.

• There is a small amount of mass at the autarky promised utility.

• Because autarky generally lies above the minimum promised utility in these regimes, it is not an absorbing state.

• Figure 1 shows the increase in profit over autarky for four parameter changes.

• To facilitate comparisons, proportional differences were used to compare the autarky case and the best response case.