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Risk exchange as a market or production game

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Author Info

  • Borglin, Anders

    () (Lund University, School of Economics and Management)

  • Flåm, Sjur Didrik

    () (University of Bergen, Department of Economics)

Abstract

Risk exchange is considered here as a cooperative game with transferable utility. The set-up fits markets for insurance, securities and contingent endowments. When convoluted payoff is concave at the aggregate endowment, there is a price-supported core solution. Under variance aversion the latter mirrors the two-fund separation in allocating to each agent some sure holding plus a fraction of the aggregate.

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Bibliographic Info

Paper provided by University of Bergen, Department of Economics in its series Working Papers in Economics with number 09/07.

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Length: 27 pages
Date of creation: 03 Sep 2007
Date of revision:
Handle: RePEc:hhs:bergec:2007_009

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Postal: Institutt for økonomi, Universitetet i Bergen, Postboks 7802, 5020 Bergen, Norway
Phone: (+47)55589200
Fax: (+47)55589210
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Web page: http://www.uib.no/econ/en
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Related research

Keywords: securities; mutual insurance; market or production games; transferable utility; extremal convolution; core solutions; variance or risk aversion; two-fund separation; CAPM.;

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  1. Evstigneev, I.V. & Flam, S.D., 2000. "Sharing Nonconvex Costs," Norway; Department of Economics, University of Bergen 1300, Department of Economics, University of Bergen.
  2. Malinvaud, E, 1973. "Markets for an Exchange Economy with Individual Risks," Econometrica, Econometric Society, vol. 41(3), pages 383-410, May.
  3. Malinvaud, E., 1972. "The allocation of individual risks in large markets," Journal of Economic Theory, Elsevier, vol. 4(2), pages 312-328, April.
  4. A. Y. Golubin, 2006. "Pareto-Optimal Insurance Policies in the Models with a Premium Based on the Actuarial Value," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 73(3), pages 469-487.
  5. Evstigneev, I.V. & Flam, S.D., 2000. "Stochastic Programming: Non-Anticipativity and Lagrange Multipliers," Norway; Department of Economics, University of Bergen 1100, Department of Economics, University of Bergen.
  6. Cass, David & Chichilnisky, Graciela & Wu, Ho-Mou, 1996. "Individual Risk and Mutual Insurance," Econometrica, Econometric Society, vol. 64(2), pages 333-41, March.
  7. Yannelis, Nicholas C, 1991. "The Core of an Economy with Differential Information," Economic Theory, Springer, vol. 1(2), pages 183-97, April.
  8. Flam, Sjur & Owen, Guillermo & Saboya, Martha, 2005. "The not-quite non-atomic game: Non-emptiness of the core in large production games," Mathematical Social Sciences, Elsevier, vol. 50(3), pages 279-297, November.
  9. Magill, Michael & Shafer, Wayne, 1991. "Incomplete markets," Handbook of Mathematical Economics, in: W. Hildenbrand & H. Sonnenschein (ed.), Handbook of Mathematical Economics, edition 1, volume 4, chapter 30, pages 1523-1614 Elsevier.
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