This paper considers a repeated unobserved endowment economy with a re
striction that agents can walk away from insurance contracts at the be
ginning of any period and contract with another insurer (one-sided com
mitment). An equilibrium is derived characterized by a unique, market-
determined insurance contract with the properly 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 distribution is nearly lo
g-normal. (C) 1995 Academic Press, Inc.