We study the efficiency properties of equilibria in a neighborhood of economies with Pareto optimal (PO) initial endowments, when the number of agents is finitely large. We provide conditions under which, for all the economies in some open neighborhood of the PO reference economy, all the...

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 studies the optimal design of fiscal policy when financial markets are incomplete at the aggregate and microeconomic level. The government trades a non-state contingent bond (liability) and cannot insure against the uncertainty in future tax revenues, while households are unable to...

At a competitive equilibrium of an incomplete-markets economy agents' marginal valuations for the tradable assets are equalized ex-ante. We characterize the finest partition of the state space conditional on which this equality holds for any economy. This leads naturally to a necessary and...

This is a leisurely introduction, in the vein of a piece in the history of science, to belated publication of my well-known paper on incomplete markets, Competitive Equilibrium with Incomplete Financial Markets

This paper challenges the widespread belief that competitive markets favor entrepreneurs who operate efficient technologies. In the context of a dynamically incomplete markets model, I show that, ceteris paribus, entrepreneurs operating efficient technologies can be driven out of a competitive...

In the present paper we study voting-based corporate control in a general equilibrium model with incomplete financial markets. Since voting takes place in a multi-dimensional setting, super-majority rules are needed to ensure existence of equilibrium. In a linear-quadratic setup we show that the...

In this paper, we examine an exchange economy with a financial market composed of three assets: a share of a stock, an European call option written on the stock, and a riskless bond. The financial market is assumed to be incomplete and the option is not a redundant asset. In such a case the...

We study consumption-portfolio and asset pricing frameworks with recursive preferences and unspanned risk. We show that in both cases, portfolio choice and asset pricing, the value function of the investor/representative agent can be characterized by a specific semilinear partial differential...