I model an incomplete markets economy where unaware agents do not perceive all states of nature, so unintended default … can occur when asset returns differ from what was perceived. The presence of default plays a crucial role in the proof of … delivery-adjusted asset returns. The First Fundamental Welfare Theorem fails because of default and pecuniary inefficiencies …

firms default. In the model, firms are assumed to be owned by a single individual whose roles as entrepreneur and consumer …. Default is thus endogenous as output determines the deliveries from the assets issued. In turn, the receipts from each asset … counter-cyclical default. We show that, under usual assumptions on utilities and technologies, an equilibrium always exists …

selection (among women) and moral hazard (predominantly among men), and the findings suggest that about 20% of default is due to …