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Risk Sharing and Group Decision Making

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  • Jehoshua Eliashberg

    (Northwestern University)

  • Robert L. Winkler

    (Indiana University and INSEAD)

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    Abstract

    In a decision-making problem where a group will receive an uncertain payoff which must be divided among the members of the group, the ultimate payoff of interest is the vector of individual payoffs received by the members of the group. In this paper, preferences are quantified in terms of cardinal utility functions for such vectors of payoffs. These utility functions can represent preferences concerning "equitable" and "inequitable" vectors of payoffs as well as attitudes toward risk. The individual utility functions are aggregated to form a group utility function for the vector of payoffs, and this latter function is, in turn, used to generate a group utility function for the overall group payoff and a sharing rule for dividing the group payoff into individual payoffs. The resulting group decisions are Pareto optimal in utility space. Properties of the sharing rule and the group utility function are investigated for additive and multilinear group utility functions.

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    File URL: http://dx.doi.org/10.1287/mnsc.27.11.1221
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    Bibliographic Info

    Article provided by INFORMS in its journal Management Science.

    Volume (Year): 27 (1981)
    Issue (Month): 11 (November)
    Pages: 1221-1235

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    Handle: RePEc:inm:ormnsc:v:27:y:1981:i:11:p:1221-1235

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    Related research

    Keywords: group decision making; risk sharing; multiattribute utility;

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    Cited by:
    1. Zhang, Junyi & Timmermans, Harry J. P. & Borgers, Aloys, 2005. "A model of household task allocation and time use," Transportation Research Part B: Methodological, Elsevier, vol. 39(1), pages 81-95, January.
    2. Radoslav S. Raykov, 2014. "Uncertain Costs and Vertical Differentiation in an Insurance Duopoly," Working Papers 14-14, Bank of Canada.
    3. Eugenio Peluso & Alain Trannoy, 2012. "The Cake-eating problem: Non-linear sharing rules," Working Papers 26/2012, University of Verona, Department of Economics.
    4. Zhang, Junyi & Kuwano, Masashi & Lee, Backjin & Fujiwara, Akimasa, 2009. "Modeling household discrete choice behavior incorporating heterogeneous group decision-making mechanisms," Transportation Research Part B: Methodological, Elsevier, vol. 43(2), pages 230-250, February.

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