On Breach of faith in General equilibrium

People usually think that default will only have a negative influence upon the economy.But,in reality some default is allowed in economy,such as the limited liability system of the company shareholders.The GE(R,λ,Q) model brings the breaching factors into consideration in the general equilibrium model,holding that under the incomplete market circumstance,default will have certain positive effect to the economy in that supply of tradable securities are increased,and more efficient risk-sharing is realized,thus improving economic efficiency.However,at the same time,the economic total risk is also increased,making economy more unsteady.Therefore,a suitable punishment will be given for the default phenomenon,limiting the level of default within the social acceptable scope,the positive effect f default then can be embodied.