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Segmented risk sharing in a continuous-time setting

Author

Listed:
  • Hector Chade

    (Department of Economics, Arizona State University, Main Campus, PO Box 873806,Tempe, AZ 85287-3806, USA)

  • Bart Taub

    (Department of Economics, University of Illinois, 1206 S. 6th Street, Champaign, IL 61820, USA)

Abstract

The economy we study is comprised of a continuum of individuals. Each has a stochastic endowment that evolves continuously and independently of all other individuals' endowment processes. Individuals are risk averse and would therefore like to insure their endowment processes. The mutual independence of their endowment processes makes it feasible for them to obtain this insurance by pooling their endowments. We investigate whether such a scheme would survive as an equilibrium in a noncooperative setting.

Suggested Citation

  • Hector Chade & Bart Taub, 2002. "Segmented risk sharing in a continuous-time setting," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 20(4), pages 645-675.
    • Handle: RePEc:spr:joecth:v:20:y:2002:i:4:p:645-675
    Note: Received: October 16, 2000; revised version: August 8, 2001
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    Citations

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    Cited by:

    1. Chade, H. & Taub, B., 2005. "Stable coalitions in a continuous-time model of risk sharing," Mathematical Social Sciences, Elsevier, vol. 50(1), pages 24-38, July.
    2. Jaramillo, Fernando & Kempf, Hubert & Moizeau, Fabien, 2015. "Heterogeneity and the formation of risk-sharing coalitions," Journal of Development Economics, Elsevier, vol. 114(C), pages 79-96.
    3. Boyarchenko, Svetlana & Levendorskii, Sergei, 2008. "Exit problems in regime-switching models," Journal of Mathematical Economics, Elsevier, vol. 44(2), pages 180-206, January.
    4. Hailin Sun & Sanxi Li & Tong Wang, 2013. "Assortative Matching and Risk Sharing," University of East Anglia Applied and Financial Economics Working Paper Series 041, School of Economics, University of East Anglia, Norwich, UK..

    More about this item

    Keywords

    Continuous-time methods; Risk sharing; Limited enforcement.;
    All these keywords.

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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