Incomplete markets and individual risks

Summary This paper studies the incomplete markets model with financial assets when the only missing markets are for individual risks. There are no aggregate risks in the economy. Assuming the individual risks are only privately observable, the only equilibria that are implementable by anonymous mechanisms are those in which prices do not vary across states of the world. Such equilibria always exist. Generically, they are locally unique and depend continuously on the parameters of the economy, just like complete-markets equilibria. Generically, there is also an infinite-dimensional manifold of equilibria in which prices do vary across states of the world. These equilibria are isomorphic to sunspot equilibria.I am grateful to Dave Cass for several helpful discussions and to Darrell Duffie for his comments on an earlier draft.