forthcoming in The Theory of Markets and Their Functioning, ed. P.J.J. Herings, G. van der Laan, and A.J.J. Talman, North-Holland

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Risk Sharing and Market Incompleteness

David K. Levine and William R. Zame

September 8, 1998

Abstract: Does incompleteness of financial markets impede risk sharing? This paper presents a simple model suggesting that it may not, provided consumers are patient, risk is purely idiosyncratic, and bond markets are open.