This paper considers a repeated unobserved endowment economy with a restriction that
agents can walk away from insurance contracts at the beginning of any period and contract
with another insurer (one-sided commitment). An equilibrium is derived characterized by a
unique, market-determined insurance contract with the property that agents never want to
walk away from it. The paper shows that trade (or insurance) still occurs and that a non-
degenerate long-run distribution of consumption exists. A numerical example shows that this …