In this paper we study the constrained efficiency of a stock market equilibrium under moral hazard.We extend a standard general equilbrium framework (Magill and Quinzii (1999) and (2002)) to allow for a more general initial ownership distribution.We show that the market allocation is constrained...

We consider a model in which the principal-agent relation between inside shareholders and the management affects the firm value.We study the effect of financing the project with risky debt in changing the incentive for a risk-neutral shareholder (the principal) to implement the project-value...

This paper studies the issue of moral hazard in the presence of decentralized international risk sharing.In the model presented, risk sharing is achieved through macro markets (markets in which claims to the GDP of a country can be traded).Moral hazard arises for the following reason: if...