When the asset market is incomplete, there typically exist taxes on trades in assets and a redistribution of revenue in the asset market that are Pareto improving. The policy is anonymous, it economizes on complexity, and it results in ex post Pareto optimal allocations; it is publicly announced...

We prove generic existence of recursive equilibrium for overlapping generations economies with uncertainty. The result holds provided there is sufficient intragenerational household heterogeneity.

These four essays address issues related to the incompleteness of financial markets in competitive exchange economies. The main point we try to establish is that when markets are incomplete, a wide range of economic policies have an impact on equilibrium allocations and therefore on the welfare...

In a three-period finite competitive exchange economy with incomplete financial markets and retrading, we study the possibility of controlling asset price volatility through financial innovation. We first give sufficient conditions on preferences and endowments implying that whatever is the...

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...

The literature on Walrasian markets in large economies with adverse selection has used various equilibrium refinements, but has obtained no general incentive efficiency of equilibrium, namely when cross-subsidies are needed for efficiency. We show that the same refined equilibria may also be...

We decentralize incentive efficient allocations in large adverse selection economies by introducing a Walrasian market for mechanisms, that is, for menus of contracts. Facing a budget constraint, informed individuals purchase (lottery) tickets to enter mechanisms, while firms sell tickets and...

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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