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@@ -414,15 +414,15 @@ def price_optimistic_beliefs(transitions, dividend_payoff, β=.75,

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p_old = p_new

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p_new = β * np.max([q @ p_old

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+ q @ dividend_payoff for q in transitions],

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1)

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axis=0)

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# If we succeed in converging, break out of for loop

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if np.max(np.sqrt((p_new - p_old)**2)) < tol:

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break

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ptwiddle = β * np.min([q @ p_old

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+ q @ dividend_payoff for q in transitions],

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1)

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axis=0)

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phat_a = np.array([p_new[0], ptwiddle[1]])

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phat_b = np.array([ptwiddle[0], p_new[1]])

@@ -482,7 +482,7 @@ def price_pessimistic_beliefs(transitions, dividend_payoff, β=.75,

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p_old = p_new

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p_new = β * np.min([q @ p_old

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+ q @ dividend_payoff for q in transitions],

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1)

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axis=0)

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# If we succeed in converging, break out of for loop

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if np.max(np.sqrt((p_new - p_old)**2)) < tol:

@@ -614,4 +614,4 @@ with **permanently optimistic** investors - this is due to the marginal investor

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```{solution-end}

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```

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[^f1]: By assuming that both types of agents always have "deep enough pockets" to purchase all of the asset, the model takes wealth dynamics off the table. The Harrison-Kreps model generates high trading volume when the state changes either from 0 to 1 or from 1 to 0.

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[^f1]: By assuming that both types of agents always have "deep enough pockets" to purchase all of the asset, the model takes wealth dynamics off the table. The Harrison-Kreps model generates high trading volume when the state changes either from 0 to 1 or from 1 to 0.

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