We propose a class of dynamic models that capture subjective (and hence unobservable) constraints on the amount of information a decision maker can acquire, pay attention to, or absorb, via an Information Choice Process (ICP). An ICP specifies the information that can be acquired about the...

We provide a geometric test of whether a general equilibrium incomplete markets (GEI) economy has Hart points---points at which the rank of the securities payoff matrix drops. Condition (H) says that, at each nonterminal node, there is an affine set (of appropriate dimension) that intersects all...

We show that debt is sustainable at a competitive equilibrium based solely on the reputation for repayment; that is, even without collateral or legal sanctions available to creditors. In an incomplete asset market, when the rate of interest falls recurrently below the rate of growth of the...

Purpose: The purpose of this paper is to analyze the efficiency loss due to incomplete financial markets when risk is induced by technological uncertainty. Design/methodology/approach: A worker-capitalist general equilibrium model is developed. It is assumed that future technical change is a...

We use supervised machine learning to approximate the expectations typically contained in the optimality conditions of an economic model in the spirit of the parameterized expectations algorithm (PEA) with stochastic simulation. When the set of state variables is generated by a stochastic...

We consider a sovereign wealth fund that invests broadly in the international financial markets. The influx to the fund has stopped. We adopt the life cycle model and demonstrate that the optimal spending rate from the fund is significantly less than the fund's expected real rate of return. The...