How do we handle negative firm profit?

mesjou / human-frictions

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How do we handle negative firm profit? #16

Closed mesjou closed 3 years ago

mesjou commented 3 years ago

firm profit could be negative if demand is small enough. Then firms profit is distributed to the agents. Should. we allow this? or should we only distribute positive profit or no profit at all?

annaalm commented 3 years ago

I guess we have to distribute whatever profit the firm gets. Otherwise we will be out of the general equilibrium framework.

mesjou commented 3 years ago

Ok make sense :) than negative from profit is the only channel that could make agents budget negative.