Efficient allocations with hidden income and hidden storage

We consider an environment in which individuals receive income shocks that are unobservable to others and can privately store resources. We provide a simple characterization of the unique efficient allocation of consumption i n cases in which the rate of return on storage is sufficiently high or, alt ernatively, in which the worst possible outcome is sufficiently dire. We sh ow that, unlike in environments without unobservable storage, the symmetric efficient allocation of consumption is decentralizable through a competiti ve asset market in which individuals trade risk-free bonds among themselves .