Constrained efficiency without commitment

Abstract

We consider an infinite horizon economy where agents share income risks by trading a complete set of contingent claims but cannot commit to their promises. Allocations are restricted to be self-enforcing relative to autarchic reservation utilities. We provide a general characterization of constrained Pareto efficiency without assuming that there are uniform gains to trade. Our results extend those in Bloise and Reichlin (2011) in several aspects. (C) 2015 Elsevier B.V. All rights reserved.