This paper studies the constrained efficient intergovernmental transfer contract between the central government and the states in a federal economy. We consider an environment with moral hazard, incomplete enforceability, and date-0 negotiation costs. The interaction of moral hazard and...

This paper analyzes the dynamic properties of portfolios that sustain dynamically complete markets equilibrium when agents have heterogeneous priors. We argue that the conventional wisdom that belief heterogeneity generates continuous trade and significant fluctuations in individual portfolios...