Rights to retrade, free-riding and insurance requirement

Jaevin Park

Economics Letters, 2023, vol. 225, issue C

Abstract: Jacklin (1987) shows that if ex-post retrading is allowed, the optimal risk-sharing contract in the Diamond–Dybvig (1983) model is unraveled because of the free-riding incentives. I construct a retrading model with a contract the offer of which depends on the proportion of insured agents, to find out in what circumstances the agents can be insured. A minimum insurance requirement can improve welfare upon the Autarky equilibrium by providing partial insurance.

Keywords: Side-trading; Liquidity insurance; Risk-sharing; Incomplete markets (search for similar items in EconPapers)
JEL-codes: D62 E44 G11 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0165176523000897
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:225:y:2023:i:c:s0165176523000897

DOI: 10.1016/j.econlet.2023.111064

Access Statistics for this article

Economics Letters is currently edited by Economics Letters Editorial Office

More articles in Economics Letters from Elsevier
Bibliographic data for series maintained by Catherine Liu ().