I demonstrate a straightforward but apparently widely unrecognized implication of the standard requirements for perfect competition: an economy in which consumers can choose to learn is generally not perfectly competitive. In particular, if endogenous welfare relevant learning is feasible, 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....

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 competitive equilibria with moral hazard in economies with aggregate risk and where trading occurs with an incomplete set of financial assets. The main conclusion of the paper is that, contrary to the individual risk economies, moral hazard is compatible with trading in competitive...

Economies with asymmetric information are encompassed by an extension of the model of general competitive equilibrium that does not require an explicit modeling of private information. Sellers have discretion over deliveries on contracts; this is in common with economies with default, incomplete...

In this article we show that in the presence of trading constraints, such as short sale constraints, the standard definition of a Rational Expectations Equilibrium allows for equilibrium prices that reveal information unknown to any active trader in the market. We propose a new definition of the...

In this paper we study industry equilibrium and the effects of integration under the assumptions that 1) firms must use outside financing and 2) they face a moral hazard problem due to the possibility of taking excessive risks. These are typical features of banking and insurance, for instance....

Asymmetric information concerns either commodities or mutually exclusive states of the world. The notion of competitive equilibrium differs between the two cases. In particular, incentive compatibility constraints are only relevant in the case of asymmetric information concerning mutually...

We show that in almost every economy with separable externalities, every competitive equilibrium can be Pareto improved by a package of anonymous commodity taxes that causes prices to adjust and markets to reclear at different levels of individual consumption. This constrained suboptimality of...