Average consumer decisions in an economy with heterogeneous subjective discount rates and risk aversion coefficients: The finite horizon case

This paper aims to study the behavior of the average rational consumer of an economy populated by heterogeneous agents in a finite horizon framework, Heterogeneity takes into account both the subjective discount rate and risk aversion coefficient. Closed-form solutions for the optimal paths of consumption and capital, of the average consumer. are derived. Moreover, a closed form solution for the economic welfare of the average consumer is obtained.