Trading volume of infinitely lived securities, such as equity, is generically zero in Lucas asset pricing models with heterogeneous agents. More generally, the end-of-period portfolio of all securities is constant over time and states in the generic economy. General equilibrium restrictions rule...

There are two important rules in a patent race: what an innovator must accomplish to receive the patent and the allocation of the benefits that flow from the innovation. Most patent races end before R&D is completed and the prize to the innovator is often less than the social benefit of the...

Abstract By making gathering large samples of data (Big Data) almost trivial, the Information Revolution has changed fundamentally how many scientists now conduct empirical research. The explosion in the variety and volume of information that is Big Data has in many cases altered both the...

The paper examines a game-theoretic model of a financial market in which asset prices are determined endogenously in terms of short-run equilibrium. Investors use general, adaptive strategies depending on the exogenous states of the world and the observed history of the game. The main goal is to...

Equilibrium allocations in models with incomplete markets are generally not Pareto-efficient, but some argue that the welfare losses from missing assets are small when time-horizons are long, agents are patient, and shocks are transitory. We show that even in the simplest infinite horizon model...

Asset markets are usually incomplete. Security exchanges often introduce derivative securities which partially complete the market. The marketmakers make profits through a bid-ask spread. We use computational methods to determine the profit-maximizing choice of options for a marketmaker and...

We consider a Lucas asset-pricing model with heterogeneous agents, exogenous labor income, and a finite number of exogenous shocks. Although agents are infinitely lived, endowments and dividends are time-invariant functions of the exogenous shock alone and are thus restricted to lie in a...

Transaction costs on financial markets may have important consequences for volumes of trade, asset pricing, and welfare. This paper introduces an algorithm for the computation of equilibria in the general equilibrium model with incomplete asset markets and transaction costs. We show that...

In a three-period finite exchange economy with incomplete financial markets and retrading, we study the effects of the degree of incompleteness and of changes in the financial structure on asset price volatility. In what are essentially no aggregate risk economies, asset price volatility is a...

The purpose of this paper is to analyze endogenous asset innovation by an entrepreneurial exchange owner in a general equilibrium model of incomplete security markets with financial transaction fees. A monopolistic market maker has the technology to introduce a new option into the economy and...