IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

Hedging, Multiple Contracting Equilibria& Nominal Contracts

Listed author(s):
  • Daron Acemoglu

Why would two risk-average agents write a nominal contract? A possible answer is that for an agent who is subject to risks caused by price variability, a nominal contract that offers hedging against these risks may be optimal. This paper argues that nominal contracts may have a role in efficiency allocating risks that are associated with changes in the price level. These risks may be fundamental to the economy or caused by imperfections. Alternatively they may be caused by the fact that other nominal contracts are written in the economy. As an additional nominal contract is preferred by an agent who has already written a nominal contract, multiple contracting equilibria may exist and nominal contracts can arise as equilibrium phenomena. Therefore this paper identifies advantages to writing nominal contracts in order to efficiently allocate risk but it also points out that under certain restrictions nominal contracts can also lead to inefficient equilibria.

To our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.

Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0088.

in new window

Date of creation: Aug 1992
Handle: RePEc:cep:cepdps:dp0088
Contact details of provider: Web page:

No references listed on IDEAS
You can help add them by filling out this form.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:cep:cepdps:dp0088. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.