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Default and Punishment in General Equilibrium

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Author Info
Pradeep Dubey
John Geanakoplos
Martin Shubik

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Abstract

We extend the standard model of general equilibrium with incomplete markets to allow for default and punishment by thinking of assets as pools. The equilibrating variables include expected delivery rates, along with the usual prices of assets and commodities. By reinterpreting the variables, our model encompasses a broad range of adverse selection and signalling phenomena in a perfectly competitive, general equilibrium framework. Copyright The Econometric Society 2005.

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File URL: http://hdl.handle.net/10.1111/j.1468-0262.2005.00563.x
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Publisher Info
Article provided by Econometric Society in its journal Econometrica.

Volume (Year): 73 (2005)
Issue (Month): 1 (01)
Pages: 1-37
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Handle: RePEc:ecm:emetrp:v:73:y:2005:i:1:p:1-37

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Pesendorfer Wolfgang, 1995. "Financial Innovation in a General Equilibrium Model," Journal of Economic Theory, Elsevier, vol. 65(1), pages 79-116, February. [Downloadable!] (restricted)
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  2. Bisin, Alberto & Gottardi, Piero, 1999. "Competitive Equilibria with Asymmetric Information," Journal of Economic Theory, Elsevier, vol. 87(1), pages 1-48, July. [Downloadable!] (restricted)
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  3. Franklin Allen & Douglas Gale, . "Optimal Security Design," Rodney L. White Center for Financial Research Working Papers 26-87, Wharton School Rodney L. White Center for Financial Research.
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  4. Helpman, Elhanan & Laffont, Jean-Jacques, 1975. "On moral hazard in general equilibrium theory," Journal of Economic Theory, Elsevier, vol. 10(1), pages 8-23, February. [Downloadable!] (restricted)
  5. Pradeep Dubey & John Geanakoplos & Martin Shubik, 1988. "Default and Efficiency in a General Equilibrium Model with Incomplete Markets," Cowles Foundation Discussion Papers 879R, Cowles Foundation, Yale University, revised Feb 1989. [Downloadable!]
  6. Gale, Douglas, 1992. "A Walrasian Theory of Markets with Adverse Selection," Review of Economic Studies, Blackwell Publishing, vol. 59(2), pages 229-55, April. [Downloadable!] (restricted)
  7. Hellwig, Martin, 1987. "Some recent developments in the theory of competition in markets with adverse selection ," European Economic Review, Elsevier, vol. 31(1-2), pages 319-325. [Downloadable!] (restricted)
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  8. Akerlof, George A, 1970. "The Market for 'Lemons': Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, MIT Press, vol. 84(3), pages 488-500, August. [Downloadable!] (restricted)
  9. Allen, Franklin & Gale, Douglas, 1991. "Arbitrage, Short Sales, and Financial Innovation," Econometrica, Econometric Society, vol. 59(4), pages 1041-68, July. [Downloadable!] (restricted)
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  10. Rothschild, Michael & Stiglitz, Joseph E, 1976. "Equilibrium in Competitive Insurance Markets: An Essay on the Economics of Imperfect Information," The Quarterly Journal of Economics, MIT Press, vol. 90(4), pages 630-49, November.
  11. Radner, Roy, 1972. "Existence of Equilibrium of Plans, Prices, and Price Expectations in a Sequence of Markets," Econometrica, Econometric Society, vol. 40(2), pages 289-303, March. [Downloadable!] (restricted)
  12. John Geanakoplos, 1996. "Promises Promises," Cowles Foundation Discussion Papers 1143, Cowles Foundation, Yale University. [Downloadable!]
  13. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June. [Downloadable!] (restricted)
  14. Hart, O. & Moore, J., 1989. "Default And Renegotiation: A Dynamic Model Of Debt," Working papers 520, Massachusetts Institute of Technology (MIT), Department of Economics.
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  15. Prescott, Edward C & Townsend, Robert M, 1984. "Pareto Optima and Competitive Equilibria with Adverse Selection and Moral Hazard," Econometrica, Econometric Society, vol. 52(1), pages 21-45, January. [Downloadable!] (restricted)
  16. Pradeep Dubey & John Geanakoplos, 2001. "Signalling and Default: Rothschild-Stiglitz Reconsidered," Cowles Foundation Discussion Papers 1305, Cowles Foundation, Yale University. [Downloadable!]
  17. William R. Zame, 1992. "Efficiency and the Role of Default When Security Markets are Incomplete," UCLA Economics Working Papers 673, UCLA Department of Economics. [Downloadable!]
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