Incentive compensation induces correlation between the portfolio of managers and the cash flow of the firms they manage. This correlation exposes managers to risk and hence gives them an incentive to hedge against the poor performance of their firms. We study the agency problem between...

This paper studies competitive equilibria in economies characterized by the presence of asymmetric information (both of the moral hazard and the adverse selection type). We consider economies where non-exclusive contracts (securities) with payoffs dependent on the agents' private information are...

Do Walrasian markets function orderly in the presence of adverse selection? In particular, is their outcome efficient when exclusive contracts are enforceable? This paper addresses these questions in the context of a Rothschild-Stiglitz insurance economy. We identify an externality associated...

We study competitive economies with adverse selection and fully exclusive contractual relationships. We consider economies where agents are privately informed over the probability distribution of their endowments, and trade to insure against this uncertainty. As in Prescott-Townsend (1984), we...

Incentive compensation induces correlation between the portfolio of managers and the cash flow of the firms they manage. This correlation exposes managers to risk and hence gives them an incentive to hedge against the poor performance of their firms. We study the agency problem between...

This paper studies competitive equilibria in economies characterized by the presence of asymmetric information, where non-exclusive contracts are traded on competitive markets and agents may be privately informed over their payoff. For such economies competitive equilibria may not exist when...

Incentive compensation induces correlation between the portfolio of managers and the cash flow of the firms they manage. This correlation exposes managers to risk and hence gives them an incentive to hedge against the poor performance of their firms. We study the agency problem between...

Incentive compensation induces correlation between the portfolio of managers and the cash flow of the firms they manage. This correlation exposes managers to risk and hence gives them an incentive to hedge against the poor performance of their firms. We study the agency problem between...

We examine the conditions under which competitive equilibria can be obtained as the limit, when the number of strategic traders gets large, of Nash equilibria in economies with asymmetric information on agents' effort and possibly imperfect observability of agents' trades. Convergence always...