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Anonymity and Individual Risk

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  • Pamela Labadie

    (George Washington University)

Abstract

Anonymity in the market place is a cornerstone of the standard competitive equilibrium framework in which agents are assumed to be price takers. Anonymity is formally incorporated into the model by assuming that the central planner is unable to determine who is who, even though the planner knows the distribution of individual risks and characteristics of the economy. The constrained Pareto optimal allocation has the property that it is envy-free in that there are fair net trades for all agents. This results in a conflict between equity and efficiency. The allocation, which also has the property that it is coalitionally fair, will result in a distribution of the intertemporal marginal rate of substitution across heterogeneous agents. This has strong implications for the stochastic discount factor used in dynamic, stochastic general equilibrium models.

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  • Pamela Labadie, 2007. "Anonymity and Individual Risk," 2007 Meeting Papers 637, Society for Economic Dynamics.
    • Handle: RePEc:red:sed007:637
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    Cited by:

    1. Ohanian, Lee E. & Prescott, Edward C. & Stokey, Nancy L., 2009. "Introduction to dynamic general equilibrium," Journal of Economic Theory, Elsevier, vol. 144(6), pages 2235-2246, November.
    2. Thomas Mariotti, 2016. "Multiple Contracting in Insurance Markets," 2016 Meeting Papers 820, Society for Economic Dynamics.

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