Before revision:  Besides establishing the existence of an equilibrium, our main result shows that the resulting equilibrium can display a lower risk-free rate and a higher risk premium relative to the usual Pareto efficient equilibrium in complete markets. Consequently, our model can simultaneously help explaining the risk-free rate and equity premium puzzles .
After revision:  Besides establishing the existence of an equilibrium, our main result shows that the resulting equilibrium can display a lower risk-free rate and a higher risk premium relative to the usual Pareto efficient equilibrium in an otherwise identical complete market .