I consider a continuous-time "two-trees" pure-exchange economy with in nite horizon. There is a single consumption good which serves as the numeraire. There are two types of investors who are heterogeneous in endowments, beliefs, and enforcement technology. Heterogeneity in endowments and beliefs provide incentives for trade in the nancial markets, which is driven by risk sharing motives and sentiment, respectively. In contrast, heterogeneity in the enforcement technology provides incentives to stop trading in the nancial markets in particular situations when it is anticipated that a counterparty with poor enforcement technology would be tempted to default on current trades
