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Collective risk aversion


  • Elyès Jouini

    () (CEREMADE - CEntre de REcherches en MAthématiques de la DEcision - Université Paris-Dauphine - CNRS - Centre National de la Recherche Scientifique)

  • Clotilde Napp

    (CREST - Centre de Recherche en Économie et Statistique - INSEE - ENSAE ParisTech - École Nationale de la Statistique et de l'Administration Économique, DRM - Dauphine Recherches en Management - Université Paris-Dauphine - CNRS - Centre National de la Recherche Scientifique)

  • Diego Nocetti

    (Clarkson University - Clarkson University)


In this paper we analyse the risk attitude of a group of heterogenous agents and we develop a theory of comparative collective risk tolerance. In particular, we characterize how shifts in the distribution of individual levels of risk tolerance affect the representative agent's degree of risk tolerance. In the model with efficient risk - sharing and two agents (e.g. a household) with isoelastic preferences we show that an increase of the level of risk tolerance of one of the agents might have an ambiguous impact on the aggregate level of risk tolerance; the latter increases for some levels of aggregate wealth while it decreases for other levels of aggregate wealth. Specifically, there are two possible shapes for aggregate risk tolerance as a function of the risk tolerance level of one of the agents: increasing curve or increasing then decreasing curve. For more general populations we characterize the effect of first order like shifts (individual levels of risk tolerance more concentrated on high values) and second order like shifts (more dispersion on individual levels of risk tolerance) on the collective level of risk tolerance. We also evaluate how shifts in the distribution of individual levels of risk tolerance impact the collective level of risk tolerance in a framework with exogenous egalitarian sharing rules. Our results permit to better characterize differences in risk taking behavior between groups and individuals and among groups with different distribution of risk preferences.

Suggested Citation

  • Elyès Jouini & Clotilde Napp & Diego Nocetti, 2013. "Collective risk aversion," Post-Print halshs-00559137, HAL.
  • Handle: RePEc:hal:journl:halshs-00559137
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    References listed on IDEAS

    1. Bone, John & Hey, John & Suckling, John, 1999. "Are Groups More (or Less) Consistent Than Individuals?," Journal of Risk and Uncertainty, Springer, vol. 18(1), pages 63-81, April.
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    3. Hara, Chiaki & Huang, James & Kuzmics, Christoph, 2007. "Representative consumer's risk aversion and efficient risk-sharing rules," Journal of Economic Theory, Elsevier, vol. 137(1), pages 652-672, November.
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    7. Masclet, David & Colombier, Nathalie & Denant-Boemont, Laurent & Lohéac, Youenn, 2009. "Group and individual risk preferences: A lottery-choice experiment with self-employed and salaried workers," Journal of Economic Behavior & Organization, Elsevier, vol. 70(3), pages 470-484, June.
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    Cited by:

    1. Marc Fleurbaey & Stéphane Zuber, 2017. "Fair Utilitarianism," Documents de travail du Centre d'Economie de la Sorbonne 17005r, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne, revised Jul 2017.
    2. Grechuk, Bogdan & Zabarankin, Michael, 2014. "Risk averse decision making under catastrophic risk," European Journal of Operational Research, Elsevier, vol. 239(1), pages 166-176.

    More about this item


    heterogenous agents; collective risk; risk tolerance; isoelastic preferences; aggregate wealth; risk preferences;

    JEL classification:

    • D1 - Microeconomics - - Household Behavior
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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