Comment on “Collateral premia and risk sharing under limited commitment” [Econ. Theory 46, 475–501 (2011)]
Michael Zierhut ()
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Michael Zierhut: Vienna Graduate School of Finance
Economic Theory Bulletin, 2014, vol. 2, issue 1, No 10, 113 pages
Abstract:
Abstract In a recent issue of Economic Theory, Kilenthong (Econ Theory 46:475–501, 2011) studies the problem of a social planner who can redistribute future consumption by changing agents’ asset portfolios subject to individual collateral constraints. One of the findings is that aggregate consumption good endowment and collateral asset payoffs together imply a minimum level of aggregate collateral beyond which optimal allocations exhibit full risk sharing. However, this result is incorrect. In the present note it is shown by means of a counterexample that: (1) when such a minimum level exists, it depends on the welfare weights, (2) such a minimum level need not exist.
Keywords: Collateralized contracts; Limited commitment (search for similar items in EconPapers)
JEL-codes: D53 (search for similar items in EconPapers)
Date: 2014
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DOI: 10.1007/s40505-013-0027-z
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