Despite economists'' long standing arguments in favor of systematic indexation of loan contracts to remove the risks associated with fluctuations in the purchasing power of money (Jevons (1875), Marshall (1887, 1923), F~lsher (1922), Friedman (1991)), surprisingly few loan contracts are indexed...

Economists hold two opposing views of the stock market: one focuses on the negative effect on incentives of separating ownership and control, the other emphasizes its beneficial role for risk sharing. Using a generalization of Diamond''s model which incorporates the effect of entrepreneurial...

This paper studies economies where agents exchange indivisible goods and money. Agents have potential use for all indivisible goods and the indivisible goods are differentiated. We assume that agents have quasi-linear utilities in money, have sufficient money endowments to afford any group of...

This paper exhibits a class of infinite-horizon economies with incomplete markets (GEI) for which the equilibrium can be explicitly derived. We show that if agents have preference orderings represented by expected discounted quadratic utilities and if their endowments are tradable, then the...

This paper studies a simple OLG model with production under the assumption that capital investment is completely irreversible: installed capital cannot be transformed back into consumption good nor transferred from one firm to another. Since firms cannot be dismantled at each generational change...

This paper presents a model of stock market equilibrium with a finite number of corporations and studies its normative properties. Each firm is run by a manager whose effort is unobservable and influences the probabilities of the firm's outcomes. The Board of Directors of each firm chooses an...

We develop an alternative approach to the general equilibrium analysis of a stochastic production economy when firm's choices of investment influence the probability distributions of their output. Using a normative approach we derive the criterion that a firm should maximize to obtain a Pareto...

This paper studies a general equilibrium model with two groups of agents, investors (shareholders) and managers of firms, in which managerial effort is not observable and influences the probabilities of firms' outcomes. Shareholders of each firm offer the manager an incentive contract which...

This paper studies qualitative properties of an optimal contract in a multi-agent setting in which agents are subject to a common shock. We derive a necessary and sufficient condition for the optimal reward of an agent to be a decreasing (increasing) function of the outputs of the other agents,...

This paper uses the framework of an OLG economy with three-period lived agents in which a durable good serves as collateral for loans, to study the effect of an unanticipated income shock when the economy is in a steady state equilibrium. We focus on the consequence of default on loans when the...