Narayana R. Kocherlakota analyzes the implications of efficient risk sharing without commitment in a symmetric information environment. He shows that if individuals are sufficiently patient, imperfect diversification is always sub-optimal in the long run, but if they are not patient, imperfect diversification is optimal. The paper demonstrates that the way history matters in efficient allocations can distinguish lack of commitment from other rationalizations of imperfect risk sharing, such as efficiency in the presence of asymmetric information. Kocherlakota considers an infinite-horizon model with two agents who have identical preferences. Each period, agents receive a random endowment of a perishable consumption good. They can transfer non-negative amounts of consumption to each other. Neither agent can commit to future transfers. He shows that autarky is the worst subgame-perfect equilibrium and characterizes the set of subgame-perfect allocations using Abreu's results. He demonstrates that in high patience scenarios, efficient allocations converge to a subgame-perfect first-best allocation. However, if individuals are impatient, every efficient allocation converges weakly to the same distribution of consumption. Efficiency implies that the long-run correlation between individual consumption and current and lagged individual income, conditional on aggregate consumption, is positive. The paper also shows how to empirically distinguish between efficient allocations in symmetric-information/no-commitment and asymmetric-information/full-commitment environments. It highlights that in symmetric-information/no-commitment environments, the vector of marginal utilities is a sufficient statistic for the future allocation of consumption. Empirically, this means that when current consumption is regressed on past marginal utilities, the latter should be insignificant. The paper concludes that models with two-sided lack of commitment, symmetric information, and no subgame-perfect first-best allocations can generate implications consistent with data on consumption and income. In such models, individual consumption is conditionally correlated with many lags of income. The paper also emphasizes that the economy "forgets" past income realizations for agents who are currently constrained.Narayana R. Kocherlakota analyzes the implications of efficient risk sharing without commitment in a symmetric information environment. He shows that if individuals are sufficiently patient, imperfect diversification is always sub-optimal in the long run, but if they are not patient, imperfect diversification is optimal. The paper demonstrates that the way history matters in efficient allocations can distinguish lack of commitment from other rationalizations of imperfect risk sharing, such as efficiency in the presence of asymmetric information. Kocherlakota considers an infinite-horizon model with two agents who have identical preferences. Each period, agents receive a random endowment of a perishable consumption good. They can transfer non-negative amounts of consumption to each other. Neither agent can commit to future transfers. He shows that autarky is the worst subgame-perfect equilibrium and characterizes the set of subgame-perfect allocations using Abreu's results. He demonstrates that in high patience scenarios, efficient allocations converge to a subgame-perfect first-best allocation. However, if individuals are impatient, every efficient allocation converges weakly to the same distribution of consumption. Efficiency implies that the long-run correlation between individual consumption and current and lagged individual income, conditional on aggregate consumption, is positive. The paper also shows how to empirically distinguish between efficient allocations in symmetric-information/no-commitment and asymmetric-information/full-commitment environments. It highlights that in symmetric-information/no-commitment environments, the vector of marginal utilities is a sufficient statistic for the future allocation of consumption. Empirically, this means that when current consumption is regressed on past marginal utilities, the latter should be insignificant. The paper concludes that models with two-sided lack of commitment, symmetric information, and no subgame-perfect first-best allocations can generate implications consistent with data on consumption and income. In such models, individual consumption is conditionally correlated with many lags of income. The paper also emphasizes that the economy "forgets" past income realizations for agents who are currently constrained.