<p>I think all the textbook is trying to say is that there can be no corner solutions to your maximization problem. </p>

<p>Not refusing consumption in any period, I think translates to consumption in each period > 0. </p>

CC BY-SA 4.0
2018-10-01T02:54:04.530Z
2018-10-01T02:54:04.530Z
erik
<p>I have an OLG model with constant level of technology and population. The utility of agent who is born in period t is:</p>

<p>U() = c1,t + 1/1+pC2,t+1</p>

<p>My textbook asks me to write the maximization problem and FOC for the agent  who is born in period t with the assumption that agent can not refuse the consumption in any of the periods. </p>

<p>I know how to write maximization problem </p>

<p>U() = c1,t + 1/1+pC2,t+1 -  max c1,t ≥0 С2,t+1 ≥0
c1t + st = wt
c2,t+1 = (1 + r,t+1)st</p>

<p>The only thing which I do not get is why we need the assumtion that agent can not refuse the consumption in any of the periods. What does it give us?</p>

<p>I am sorry of the question is obvious, I am just studying OLG model on my own and do not get everything.</p>

CC BY-SA 4.0
2018-09-29T23:29:26.683Z
Do you mean $U(t) = c_{1,t} + \frac{1}{1 + \rho}\left(c_{2,t+1}\right)$?
Kenneth Rios
<olg>
Why in maximization in OLG model with 1 generations we assume that both consumptions are positive?
Anya Pilipentseva
# Why in maximization in OLG model with 1 generations we assume that both consumptions are positive?

(Asked by: username_0 on 2018-09-29)

I have an OLG model with constant level of technology and population. The utility of agent who is born in period t is:

U() = c1,t + 1/1+pC2,t+1

My textbook asks me to write the maximization problem and FOC for the agent who is born in period t with the assumption that agent can not refuse the consumption in any of the periods.

I know how to write maximization problem

U() = c1,t + 1/1+pC2,t+1 - max c1,t ≥0 С2,t+1 ≥0
c1t + st = wt
c2,t+1 = (1 + r,t+1)st

The only thing which I do not get is why we need the assumtion that agent can not refuse the consumption in any of the periods. What does it give us?

I am sorry of the question is obvious, I am just studying OLG model on my own and do not get everything.

**Tags:** olg
> **Comments:**
> **username_1**: Do you mean $U(t) = c_{1,t} + \frac{1}{1 + \rho}\left(c_{2,t+1}\right)$?  

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## 1 answers

### Answer by username_2 on 2018-10-01. Score: 1

I think all the textbook is trying to say is that there can be no corner solutions to your maximization problem.

Not refusing consumption in any period, I think translates to consumption in each period > 0.


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