It is shown how intergenerational risk sharing can be achieved by transfers from the young generation to the old generation such that the young generation will never have an incentive to unilaterally renege on the transfer. This contradicts a claim made in Gordon and Varian (1988).

Recent work on consumption allocations in village economies finds that idiosyncratic variation in consumption is systematically related to idiosyncratic variation in income, thus rejecting the hypothesis of full risk-pooling. We attempt to explain these observations by adding limited commitment...

In this paper we consider a regulated monopoly that can pad its costs to increase its cost reimbursement. Even while padding is ineácient the optimal incentive scheme tolerates some padding of costs to reduce the information rents paid to low cost types. It is shown that high cost firms pad...

This paper examines a dynamic model of mutual insurance when households can also engage in self-insurance by storage. This mutual insurance is informal as it is assumed that there is no enforcement mechanism, so any mutual insurance arrangements must be self-enforcing. It is shown how...

This paper considers a simple stochastic model of international trade with three countries. Two of the tree countries are in an economic union. Comparisons are made between equilibrium welfare for these two countries under fixed and flexible exchange rate regimes. Within the model it is shown...