In this paper we develop a differential technique for investigating the welfare effects of financial innovation in incomplete markets. Utilizing this technique, and after parametrizing the standard competitive, pure-exchange economy by both endowments and utility functions, we establish the...

The literature on Walrasian markets in large economies with adverse selection has used various equilibrium refinements, but has obtained no general incentive efficiency of equilibrium, namely when cross-subsidies are needed for efficiency. We show that the same refined equilibria may also be...

We study two-sided many-to-one matching markets with interdependent valuations and imperfect information held by one side of the market. The other side has common and known preferences over potential mates. In this setting, pairwise stability does not imply group stability: mechanisms that are...

In this paper the existence of unemployment is partly explained as being the result of coordination failures. It is shown that as a result of self-fulfilling pessimistic expectations, even at Walrasian prices, a continuum of equilibria results, among which an equilibrium with approximately no...

We prove the generic existence of a recursive equilibrium for overlapping-generations economies with uncertainty. "Generic" here means in a residual set of utilities and endowments. The result holds provided there is a sufficient number of potentially different individuals within each cohort....