The Reservation Wage under CARA and Limited Borrowing

Published: March 15, 2009, 11 a.m.

b'A continuous-time sequential job search model with savings and CARA preferences is solved analytically without resorting to unlimited borrowing and real-valued consumption. I isolate the effects of limited borrowing and nonnegative consumption as well as risk-aversion on the reservation wage by using a system of ordinary differential equations.'