decline. While participating contracts embedding these guarantees are designed to share market risk across investor cohorts … when guarantees are not binding, we study how binding guarantees distort inter-cohort risk sharing. Using regulatory data …

explore this possibility, I develop a theory that unifies models of investment choice, informal risk sharing, and formal … inefficiencies. First, borrowers free-ride on their partners, making risky investments without compensating partners for this risk …. Second, the addition of peer-monitoring overcompensates, leading to sharp reductions in risk-taking and profitability. Equity …

Commitment failure lies at the core of incomplete contract theory, yet its quantitative significance has rarely been …