In this note we study a take-it-or-leave-it bargaining procedure between two risk neutral individuals engaged in the joint stochastic production of a commodity. Each individual has to exert effort, that is, to provide a one-dimensional input which is unobserved to the other individual. The...

In a matching model of firm formation with moral hazard, we characterize the equilibrium for economies with scarcity of capital and study the effects of redistributive taxation. We give necessary and sufficient conditions determining the equilibrium matching patterns, payoffs and interest rate....

When the asset market is incomplete, there typically exist taxes on trades in assets and a redistribution of revenue in the asset market that are Pareto improving. <p> The policy is anonymous, it economizes on complexity, and it results in ex post Pareto optimal allocations, it is publicly...</p>

We consider a model of endogenous occupational choice in economies with a continuum of individuals who differ in their endowments. Individuals have a choice of remaining self-employed or engaging in productive matches with another individual, i.e., forming firms. Matches are subject to a moral...

In exchange economies where moral hazard affects the distribution of individual risks, we study the viability of linear nonexclusive contracts. It is shown that the linearity in prices and payoffs is compatible with the presence of moral hazard when coupled with a simple participation fee. More...

We study an economy with competitive commodity markets and exclusive pairwise contractual relations with moral hazard, where both the principal and the agent can be risk averse. We show existence of equilibria and their generic constrained suboptimality, by means of a change in the compensation...

We prove existence of equilibria with proportional transaction costs on asset trading, using homotopy methods.

When the asset market is incomplete, there typically exist taxes on trades in assets and a redistribution of revenue in the asset market that are Pareto improving. The policy is anonymous, it economizes on complexity, and it results in ex post Pareto optimal allocations; it is publicly announced...

We study competitive equilibria with moral hazard in economies with aggregate risk and where trading occurs with an incomplete set of financial assets (this version preliminarly analyzes economies with trading in only one asset). The main conclusion of the paper is that, contrary to the...

In a two-period finite competitive exchange economy with incomplete financial markets and retrading, we show the generic existence of financial innovation which decreases equilibrium price volatility (as well as innovation which increases it). The existence