Rational beliefs (in the form of WAMS measures) are expectations which though consistent with empirical observations, may deviate from the true underlying probability measure under which data is generated.We provide results on, as well as a decomposition of, WAMS measures and use this to...

Rational beliefs (in the form of WAMS measures) are expectations which though consistent with empirical observations, may deviate from the true underlying probability measure under which data is generated.We provide results on, as well as a decomposition of, WAMS measures and use this to...

A central proposition on which much of normative economics is founded asserts that if two or more adults voluntarily agree to an exchange or trade and this does not have a negative fall-out on others, then government should not stop this exchange. Yet, on a variety of matters (hazardous work,...

We give two procedures for determining whether efficient Pareto improving local changes are possible. When they are, the procedures compute for them. Any procedure generating efficient and Pareto improving changes can be replicated by these procedures. The two programs form a striking duality....

A core allocation of a complete information economy can be characterized as one that would not be unanimously rejected in favor of another feasible alternative by any coalition. We use this test of coalitional voting in an incomplete information environment to formalize a notion of resilience....

We show that very little is needed to create liquidity under-supply in equilibrium: only the presence of credit constraints on demand. We show that the under-supply is a non-monotone function of the demand distortion that causes it, a result that may have interesting implications for emerging...

In this paper we consider a model where some consumers act in a boundedly rational way by treating money as non-fungible (Kahneman and Tversky (1979) and (1984), Thaler (1987) and (1990). The budget is broken up into different expenditure groups (cookie-jars). Given the amount of resources...

In economies with private firm ownership, when markets are incomplete, and firm shareholders change over time, there is no broad agreement on what ought to be a firm's objective. It is shown that ex-post, profit maximization is consistent with shareholder preferences in such economies; that is,...

This paper provides a general approach in the framework of a complete markets stochastic overlapping generations model to assess whether debt Ponzi schemes are feasible and Pareto-improving. We derive conditions in terms of bond interest rates of different maturities which can be used to assess...

When asset markets are incomplete there are almost always many Pareto improving policy interventions. Remarkably, these interventions do not involve adding any new markets. Focusing on tax policy, I create a framework for proving the existence of Pareto improving taxes, for computing them, and...