This paper shows that a competitive equilibrium exists in an exchange economy with incomplete financial markets where redundant assets are traded and the asset trading of each agent is subject to endogenous portfolio constraints. The set of budget-feasible portfolios need not be bounded in the...

There is a general presumption that social preferences can be ignored if markets are competitive. Market experiments (Smith 1962) and recent theoretical results (Dufwenberg et al. 2008) suggest that competition forces people to behave as if they were purely self-interested. We qualify this view....

There is a general presumption that social preferences can be ignored if markets are competitive. Market experiments (Smith 1962) and recent theoretical results (Dufwenberg et al. 2008) suggest that competition forces people to behave as if they were purely self-interested. We qualify this view....

Das Geschehen auf den Finanzmärkten hängt vom individuellen Verhalten ab, wird aber auch wesentlich bestimmt durch die Ausgestaltung des Finanzsystems, das heisst durch die Rollen, die den einzelnen Akteure zugewiesen werden, und durch die Regeln für die Interaktion der verschiedenen Rollen....

There is a general presumption that social preferences can be ignored if markets are competitive. Market experiments (Smith 1962) and recent theoretical results (Dufwenberg et al. 2008) suggest that competition forces people to behave as if they were purely self-interested. We qualify this view....

There is a general presumption that social preferences can be ignored if markets are competitive. Market experiments (Smith 1962) and recent theoretical results (Dufwenberg et al. 2008) suggest that competition forces people to behave as if they were purely self-interested. We qualify this view....

We develop a general equilibrium model of banks' capital structure, featuring heterogeneous portfolio risk and an imperfectly elastic supply of bank equity stemming from financial market segmentation. In our model, equity is costly and serves as a buffer against insolvency. Banks are ex-ante...

Das Geschehen auf den Finanzmärkten hängt vom individuellen Verhalten ab, wird aber auch wesentlich bestimmt durch die Ausgestaltung des Finanzsystems, das heisst durch die Rollen, die den einzelnen Akteure zugewiesen werden, und durch die Regeln für die Interaktion der verschiedenen Rollen....

We extend the general equilibrium economy of Holmstrom and Tirole (1997) to optimal reporting of productive assets and examine when the accounting process can contribute to financial acceleration. Given a small change in aggregate capital stock, the economy may respond with large readjustments...

Bank runs may serve to communicate information across agents, and thus enhance rather than thwart allocation efficiency by making the fundamentals determine the asset prices. Figuratively speaking, banks die (go bankrupt) singing a swan song (revealing hidden information). In this way bank runs...