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Comment on “Collateral premia and risk sharing under limited commitment” [Econ. Theory 46, 475–501 (2011)]

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  • Michael Zierhut

    (Vienna Graduate School of Finance)

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.

Suggested Citation

  • Michael Zierhut, 2014. "Comment on “Collateral premia and risk sharing under limited commitment” [Econ. Theory 46, 475–501 (2011)]," Economic Theory Bulletin, Springer;Society for the Advancement of Economic Theory (SAET), vol. 2(1), pages 111-113, April.
    • Handle: RePEc:spr:etbull:v:2:y:2014:i:1:d:10.1007_s40505-013-0027-z
    DOI: 10.1007/s40505-013-0027-z
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    Cited by:

    1. Weerachart Tee Kilenthong, 2014. "Correction for “Collateral premia and risk sharing under limited commitment” [Econ. Theory 46, 475–501 (2011)]," Economic Theory Bulletin, Springer;Society for the Advancement of Economic Theory (SAET), vol. 2(1), pages 115-118, April.

    More about this item

    Keywords

    Collateralized contracts; Limited commitment;

    JEL classification:

    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets

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