In this paper, we consider economies with (possibly endogenous) solvency constraints under uncertainty. Constrained ine±ciency corresponds to a feasible redistribution yielding a welfare improvement beginning from ev- ery contingency reached by the economy. A sort of Cass Criterion (Cass [10])...

We prove indeterminacy of competitive equilibrium in sequential economies, where limited commitment requires the endogenous determination of solvency constraints preventing debt repudiation (Alvarez and Jermann [3]). In particular, we show that, for any arbitrary value of social welfare in...

In this paper, we provide a characterization of interim inefficiency in stochastic economies ofoverlapping generations under possibly sequentially incomplete markets. With respect to the established body of results in the literature, we remove the hypothesis of two-period horizons,by considering...

In a general economy of overlapping generations, I introduce a notion of uniform ine±ciency, corresponding to the occurrence of a Pareto improvement with a small uniform destruction of resources (Debreu [11]). I provide necessary and su±cient conditions for uniform ine±ciency in terms of...

This paper studies the optimal determination of bankruptcy exemptions for risk averse borrowers who use unsecured contracts but have the possibility of defaulting. I show that, in a large class of economies, knowledge of four variables is sufficient to determine whether a bankruptcy exemption...

In this paper, I construct a model of an exchange economy in which bankruptcy arises in a manner similar to what we observe. This model is a more realistic representation of some markets in which intertemporal assets are traded. Using standard and natural assumptions, I show that every economy...

This paper considers a two-period monetary double auction with incomplete markets of securities and derivatives. Players may share heterogenous beliefs. Short positions in derivatives are constrained by collateral requirements. A central Bank stands ready to lend money or engage in...