CITANNA Alessandro and CHAKRABORTY Archishman
Abstract: 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 linear financial contracts, and gives rise to no manipulation problem. We establish existence of nonmanipulable equilibria provided that there are no relative price effects (e.g., a one-commoditiy economy), and that financial markets display nonlinearly homogeneous payoffs (e.g., nominal), and are sufficiently incomplete. Finally, we justify the linear contract as the optimal pricing schedule in a specific trading game with an auctioneer.
31 pages, September 14, 1999
Full text files
Questions (including download problems) about the papers in this series should be directed to Antoine Haldemann ()
Report other problems with accessing this service to Sune Karlsson ().
This page generated on 2018-02-22 16:52:53.