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Differentiability of the Efficient Frontier when Commitment to Risk Sharing is Limited

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  • Thorsten Koeppl

    ()
    (Department of Economics, Queen's University)

Abstract

This paper shows that the value function describing efficient risk sharing with limited commitment is not necessarily differentiable everywhere. We link differentiability of the value function to history dependence of efficient allocations and provide sufficient conditions for both properties.

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File URL: http://qed.econ.queensu.ca/working_papers/papers/qed_wp_1049.pdf
File Function: First version 2004
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Bibliographic Info

Paper provided by Queen's University, Department of Economics in its series Working Papers with number 1049.

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Length: 9 pages
Date of creation: Dec 2004
Date of revision:
Handle: RePEc:qed:wpaper:1049

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Keywords: Risk Sharing; Limited Commitment; Differentiability of Efficient Frontier;

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References

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  1. Kocherlakota, Narayana R, 1996. "Implications of Efficient Risk Sharing without Commitment," Review of Economic Studies, Wiley Blackwell, vol. 63(4), pages 595-609, October.
  2. Ligon, Ethan & Thomas, Jonathan P & Worrall, Tim, 2002. "Informal Insurance Arrangements with Limited Commitment: Theory and Evidence from Village Economies," Review of Economic Studies, Wiley Blackwell, vol. 69(1), pages 209-44, January.
  3. Kehoe, Timothy J & Levine, David K, 2001. "Liquidity Constrained Markets versus Debt Constrained Markets," Econometrica, Econometric Society, vol. 69(3), pages 575-98, May.
  4. Benveniste, L M & Scheinkman, J A, 1979. "On the Differentiability of the Value Function in Dynamic Models of Economics," Econometrica, Econometric Society, vol. 47(3), pages 727-32, May.
  5. Coate, Stephen & Ravallion, Martin, 1993. "Reciprocity without commitment : Characterization and performance of informal insurance arrangements," Journal of Development Economics, Elsevier, vol. 40(1), pages 1-24, February.
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Cited by:
  1. Pierre Dubois & Bruno Jullien & Thierry Magnac, 2008. "Formal and Informal Risk Sharing in LDCs: Theory and Empirical Evidence," Econometrica, Econometric Society, vol. 76(4), pages 679-725, 07.
  2. Rincón-Zapatero, Juan Pablo & Santos, Manuel S., 2009. "Differentiability of the value function without interiority assumptions," Journal of Economic Theory, Elsevier, vol. 144(5), pages 1948-1964, September.
  3. Blundell,Richard & Newey,Whitney K. & Persson,Torsten (ed.), 2006. "Advances in Economics and Econometrics," Cambridge Books, Cambridge University Press, number 9780521692083, April.
  4. Huang, Pidong, 2013. "Optimal Unemployment Insurance With Different Types of Job," MPRA Paper 46626, University Library of Munich, Germany.
  5. Carmona, Guilherme, 2006. "On the Optimality of the Equality Matching Form of Sociality," FEUNL Working Paper Series wp489, Universidade Nova de Lisboa, Faculdade de Economia.
  6. Tessa Bold, 2008. "Implications of Endogenous Group Formation for Efficient Risk-Sharing," Economics Series Working Papers 387, University of Oxford, Department of Economics.
  7. William Fuchs & Francesco Lippi, 2005. "Monetary Union with Voluntary Participation," Discussion Papers 04-013, Stanford Institute for Economic Policy Research.

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