A Reconsideration of Arrow-Lind: Risk Aversion, Risk Sharing, and Agent Choice
AbstractWe consider the original Arrow-Lind framework in which a government undertakes a risky project to be shared among many taxpayers. In our model, the taxpayers decide the level of participation in the risky project. Moreover, the amount of taxes collected by the government fully finances the public project. In this case, we show that projects cannot be evaluated only on the basis of expected benefits since the resulting tax determined by the model is incompatible with any risk sharing.
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Bibliographic InfoPaper provided by CIRPEE in its series Cahiers de recherche with number 1201.
Date of creation: 2012
Date of revision:
Arrow-Lind Theorem; Risk aversion; Risk sharing; Choice;
Find related papers by JEL classification:
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-01-18 (All new papers)
- NEP-ENT-2012-01-18 (Entrepreneurship)
- NEP-UPT-2012-01-18 (Utility Models & Prospect Theory)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Mirman, Leonard J. & Santugini, Marc, 2013.
"Firms, shareholders, and financial markets,"
The Quarterly Review of Economics and Finance,
Elsevier, vol. 53(2), pages 152-164.
- Leonard J. Mirman & Marc Santugini, 2008. "Firms, Shareholders, and Financial Markets," Cahiers de recherche 08-05, HEC Montréal, Institut d'économie appliquée, revised Mar 2013.
- Leonard J. Mirman & Marc Santugini, 2011. "Firms, Shareholders, and Financial Markets," Cahiers de recherche 1124, CIRPEE.
- Arrow, Kenneth J & Lind, Robert C, 1970. "Uncertainty and the Evaluation of Public Investment Decisions," American Economic Review, American Economic Association, vol. 60(3), pages 364-78, June.
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