Problem Formulation

Let us now consider a discrete time infinite-horizon economy and suppose that the econ­omy admits a representative household. In particular, once again ignoring uncertainty, the representative household has the t = 0 objective function

192

Where does the exponential form of the discounting in (5.12) come from? At some level, we called discounting in the discrete time case also “exponential”, so the link should be

5.6.