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Sharing responsibility: what they didn't teach you in kindergarten

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  • Michael R. Powers

Abstract

Purpose - The purpose of this paper is to consider the problem of allocating responsibility for risk through a simple classroom vignette that illustrates some of the difficulties encountered in more complex real‐world scenarios. Design/methodology/approach - After considering a number ofad hocallocation methods, this study focuses on the Shapley and Aumann‐Shapley values from cooperative game theory. Findings - Shows that the Aumann‐Shapley value provides a useful tool for allocating risk in a real‐world insurance context, and therefore may be used to distribute capital (surplus) and premium loadings. Originality/value - The paper offers insights into both the challenges of the risk‐allocation problem and its proposed solutions.

Suggested Citation

  • Michael R. Powers, 2007. "Sharing responsibility: what they didn't teach you in kindergarten," Journal of Risk Finance, Emerald Group Publishing Limited, vol. 8(2), pages 93-96, March.
    • Handle: RePEc:eme:jrfpps:15265940710732305
    DOI: 10.1108/15265940710732305
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