Fixing a risky intertemporal, interagent consumption profile, its quot;social costquot; is the total willingness to pay for smoothing everyone's consumption. It decomposes into a quot;micro costquot; capturing the inefficiency in the distribution of total consumption, risky as it is, and a...

I study the welfare implications of size-dependent firm regulation policies (SDPs) in the presence of entrepreneurial risks. Although SDP has been considered a source of misallocation, I show that, once entrepreneurial risks are taken into account, SDP can improve efficiency. Quantitatively, I...

This paper focuses on a single firm with constant returns to scale in a multi-period setting with incomplete markets and a single good per state. Profits vanish whenever the firm maximizes profits with respect to a given price system. The paper addresses the following question: Shall the firm...

In an exchange economy under uncertainty with two periods, one physical good, and finitely many states of the world, we show that for every (complete or incomplete) market span there exists a sequence of securities such that if they are introduced into markets one by one, the prices of any...

The paper analyzes a two period general equilibrium model with individual risk, aggregate uncertainty and moral hazard. There is a large number of households, each facing two individual states of nature in the second period. These states differ solely in the household's vector of initial...

This paper defines and studies optimality in a dynamic stochastic economy with finitely lived agents, and investigates the optimality properties of an equilibrium with or without sequentially complete markets. Various Pareto optimality concepts are considered, including interim and ex ante...

The stationary sunspot equilibria of a simple OLG economy with heterogeneous agents areconsidered. These equilibria are known to be suboptimal. The focus of the paper is on the efficacy,based on welfare economic considerations and informational requirements, of government policy insuch an...

This paper argues that the introduction of a short-sale constraint in the Arrow-Radner framework invalidates standard definitions of complete and incomplete markets. Two threshold values with familiar properties arise in this constrained set-up. If short sales are not allowed on some security,...

I study the welfare implications of size-dependent firm regulation policies (SDPs) in the presence of entrepreneurial risks. Although SDP has been considered a source of misallocation, I show that, once entrepreneurial risks are taken into account, SDP can improve efficiency. Quantitatively, I...

Economists often associate information efficiency of prices with allocative (Pareto) efficiency. When arbitrageurs connect segmented markets to correct a misallocation of risk, this assumption is sound. However, when opportunities for arbitrage or financial innovation arise from mispricings...