Hi,

I am trying to solve a similar model (total capital is predetermined, its allocation is not).

I therefore use the timing of the above Case 1 for production and aggregation, but how should I treat capital timing in the two agents (entrepreneur and household in my case) budget constraints?

I use

c^h_t + q^k_tk^h_t=w_t^hl^h_t+q^k_t(1-\delta)k^h_{t-1}+f(k^h_t)

and

c^e_t + q^k_tk^e_t+w_t^hl^{d}_t=q^k_t(1-\delta)k^e_{t-1}+f(k^e_t,l_t^{d})

but I have 14 eigenvalues larger than 1 for 12 forward looking variables.

Any suggestion would be really much appreciated.

Thanks,

Aldo