In a three-period finite competitive exchange economy with incomplete financial markets and retrading, we show the generic existence of financial innovation which decreases equilibrium price volatility (as well as innovation which incresases it). The existence is obtained under conditions of...

We study competitive equilibria with moral hazard in economies with aggregate risk and where trading occurs with an incomplete set of financial assets. The main conclusion of the paper is that, contrary to the individual risk economies, moral hazard is compatible with trading in competitive...

In this paper we re-examine generic constrained suboptimality of equilibrium allocations with incomplete numeraire asset markets. We provide a general framework which is capable of resolving some issues left open by the previous literature, and encompasses many kinds of intervention in partially...

In this paper the existence of unemployment is partly explained as being the result of coordination failures. It is shown that as a result of self-fulfilling pessimistic expectations, even at Walrasian prices, a continuum of equilibria results, among which an equilibrium with approximately no...

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