Consider the problem of a value-maximizing firm called Progress Panda whose profit function at time t is given by I(Kt, A) = e^(AKt), where e is the natural exponent. At denotes the productivity level, Kt denotes capital, and 0 is a parameter representing the elasticity of output with respect to capital. Assume that there is no depreciation of capital, so the law of motion of capital is given by:Kt 1 = Kt I,where I is investments in capital at time t. The price of a unit of capital good is p,
Consider the problem of a value-maximizing firm called Progress P…
Jun 6, 2023
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