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When does aggregation reduce risk aversion?

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  • Chambers, Christopher P.
  • Echenique, Federico

Abstract

We study the problem of risk sharing within a household or syndicate. A household shares risky prospects using a social welfare functional. We characterize the social welfare functionals such that the household is collectively less risk averse than each member, and satisfies the Pareto principle and an invariance axiom. We single out the sum of certainty equivalents as the unique member of this family which is quasiconcave over riskless allocations.

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Bibliographic Info

Article provided by Elsevier in its journal Games and Economic Behavior.

Volume (Year): 76 (2012)
Issue (Month): 2 ()
Pages: 582-595

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Handle: RePEc:eee:gamebe:v:76:y:2012:i:2:p:582-595

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Web page: http://www.elsevier.com/locate/inca/622836

Related research

Keywords: Certainty equivalent; Aggregation; Risk aversion; Sum of individual certainty equivalents;

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References

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Citations

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Cited by:
  1. Nascimento, Leandro, 2012. "The ex-ante aggregation of opinions under uncertainty," Theoretical Economics, Econometric Society, vol. 7(3), September.
  2. Marc Fleurbaey & Stéphane Zuber, 2014. "Fair management of social risk," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00973480, HAL.
  3. Thibault Gajdos & Jean-Christophe Vergnaud, 2009. "Decisions with conflicting and imprecise information," LSE Research Online Documents on Economics 27005, London School of Economics and Political Science, LSE Library.
  4. Mohammed Abdellaoui & Olivier l’Haridon & Corina Paraschiv, 2013. "Individual vs. couple behavior: an experimental investigation of risk preferences," Theory and Decision, Springer, vol. 75(2), pages 175-191, August.
  5. Tim Willems, 2013. "Political Accountability and Policy Experimentation: Why to Elect Left-Handed Politicians?," Economics Series Working Papers 647, University of Oxford, Department of Economics.

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