diff --git a/lectures/harrison_kreps.md b/lectures/harrison_kreps.md index 03cc6d269..1c91158af 100644 --- a/lectures/harrison_kreps.md +++ b/lectures/harrison_kreps.md @@ -276,11 +276,14 @@ def price_single_beliefs(transition, dividend_payoff, β=.75): """ Function to Solve Single Beliefs """ - # First compute inverse piece - imbq_inv = la.inv(np.eye(transition.shape[0]) - β * transition) + # First compute (I - βQ) + A = np.eye(transition.shape[0]) - β * transition - # Next compute prices - prices = β * imbq_inv @ transition @ dividend_payoff + # Next compute βQd + b = β * (transition @ dividend_payoff) + + # Solve linear system + prices = la.solve(A, b) return prices ```