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Strategy-Proof Risk Sharing

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Author Info
Biung-Ghi Ju (Department of Economics, The University of Kansas)

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Abstract

We consider risk sharing problems with a single good and ?nite number of states. Agents have a common prior and their preferences are represented in the expected utility form and are risk averse. We study efficient and individually rational risk sharing rules satisfying strategy-proofness, the requirement that no one can ever be bene?ted by misrepresenting his preference. When aggregate certainty holds, we show that ¡°?xed price selections¡± from the Walrasian correspondence are the only rules satisfying efficiency, individual rationality, and strategy-proofness. However, when aggregate uncertainty holds, we show that there exists no rule satisfying the three requirements. Moreover, in the two agents case, we show that dictatorial rules are the only efficient and strategy-proof rules. Dropping the common prior assumption in the model, we show that this assumption is necessary and sufficient for the existence of rules satisfying the three main requirements in the two agents and aggregate certainty case.

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File URL: http://www.ku.edu/~bgju/2003Papers/200305Ju.pdf
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Publisher Info
Paper provided by University of Kansas, Department of Economics in its series WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS with number 200305.

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Length: 37 pages
Date of creation: Apr 2003
Date of revision: Apr 2003
Handle: RePEc:kan:wpaper:200305

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Related research
Keywords: Risk sharing; strategy-proofness; efficiency; individual rationality.;

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    Other versions:
  4. Bacharach, Michael, 1985. "Some extensions of a claim of Aumann in an axiomatic model of knowledge," Journal of Economic Theory, Elsevier, vol. 37(1), pages 167-190, October. [Downloadable!] (restricted)
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  6. Satterthwaite, Mark A & Sonnenschein, Hugo, 1981. "Strategy-Proof Allocation Mechanisms at Differentiable Points," Review of Economic Studies, Blackwell Publishing, vol. 48(4), pages 587-97, October. [Downloadable!] (restricted)
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  11. Chateauneuf, Alain & Dana, Rose-Anne & Tallon, Jean-Marc, 2000. "Optimal risk-sharing rules and equilibria with Choquet-expected-utility," Journal of Mathematical Economics, Elsevier, vol. 34(2), pages 191-214, October. [Downloadable!] (restricted)
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  14. Maskin, Eric, 1999. "Nash Equilibrium and Welfare Optimality," Review of Economic Studies, Blackwell Publishing, vol. 66(1), pages 23-38, January. [Downloadable!] (restricted)
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  16. Thomson, William, 1984. "The Manipulability of Resource Allocation Mechanisms," Review of Economic Studies, Blackwell Publishing, vol. 51(3), pages 447-60, July. [Downloadable!] (restricted)
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    • Salvador Barbera & Matthew O. Jackson, 1993. "Strategy-Proof Exchange," Discussion Papers 1021, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
  18. Satterthwaite, Mark Allen, 1975. "Strategy-proofness and Arrow's conditions: Existence and correspondence theorems for voting procedures and social welfare functions," Journal of Economic Theory, Elsevier, vol. 10(2), pages 187-217, April. [Downloadable!] (restricted)
  19. Shigehiro Serizawa & John A. Weymark, 2002. "Efficient Strategy-Proof Exchange and Minimum Consumption Guarantees," Working Papers 0216, Department of Economics, Vanderbilt University, revised Aug 2002. [Downloadable!]
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  20. Hurwicz, L, 1979. "Outcome Functions Yielding Walrasian and Lindahl Allocations at Nash Equilibrium Points," Review of Economic Studies, Blackwell Publishing, vol. 46(2), pages 217-25, April. [Downloadable!] (restricted)
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