This paper examines the effects of extrinsic uncertainty or sunspots on competitive equilibrium when financial markets are incomplete. For the canonical two-period, pure-exchange model with bonds (or so-called "nominal assets," yielding overall returns specified in units of account, and...

This paper analyzes the feasibility of sustaining uniformly positive consumption forever--even when flows of exhaustible resources are an indispensable input. The main result is a characterization of an economy's capability for sustaining such consumption--under quite general maintained...

In this paper we develop a differential technique for investigating the welfare effects of financial innovation in incomplete markets. Utilizing this technique, and after parametrizing the standard competitive, pure-exchange economy by both endowments and utility functions, we establish the...