IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

The Cake-eating problem: Non-linear sharing rules

  • Eugenio Peluso

    ()

    (Department of Economics (University of Verona))

  • Alain Trannoy

    (EHESS, GREQAM-IDEP, Marseille)

Consider the most simple problem in microeconomics, a maximization problem with an additive separable utility function over bundles of two goods which provide equal sat- isfaction to an agent. Although simple, this framework allows for a very wide range of applications, from the Arrow-Debreu contingent claims case to the risk-sharing problem, including standard portfolio choice, intertemporal individual consumption, demand for in- surance and tax evasion. We show that any Engel curve can be generated through such a simple program and the necessary and suffi cient restrictions on the demand system to be the outcome of such a maximisation process. Moreover, we identify three classes of utility function that generate non-linear sharing rules. The gap between the two expen- diture shares increases in absolute, average or marginal terms with the total amount of wealth, depending on whether DARA, DRRA and convex risk tolerance are considered. The extension of the different results to the case of more than two goods is provided.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://dse.univr.it/home/workingpapers/2012WP26PelusoTrannoy.pdf
File Function: First version
Download Restriction: no

Paper provided by University of Verona, Department of Economics in its series Working Papers with number 26/2012.

as
in new window

Length: 31
Date of creation: Sep 2012
Date of revision:
Handle: RePEc:ver:wpaper:26/2012
Contact details of provider: Postal: Vicolo Campofiore, 2 - I-37129 Verona
Phone: +390458028097
Fax: +390458028486
Web page: http://www.dse.univr.it
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Gollier, C., 1997. "Wealth Inequality and Asset Pricing," Papers 97.486, Toulouse - GREMAQ.
  2. Carroll, Christopher D & Kimball, Miles S, 1996. "On the Concavity of the Consumption Function," Econometrica, Econometric Society, vol. 64(4), pages 981-92, July.
  3. Peluso, Eugenio & Trannoy, Alain, 2007. "Does less inequality among households mean less inequality among individuals?," Journal of Economic Theory, Elsevier, vol. 133(1), pages 568-578, March.
  4. Jehoshua Eliashberg & Robert L. Winkler, 1981. "Risk Sharing and Group Decision Making," Management Science, INFORMS, vol. 27(11), pages 1221-1235, November.
  5. Maurizio Mazzocco & Shiv Saini, 2012. "Testing Efficient Risk Sharing with Heterogeneous Risk Preferences," American Economic Review, American Economic Association, vol. 102(1), pages 428-68, February.
  6. David E. Bell, 1988. "One-Switch Utility Functions and a Measure of Risk," Management Science, INFORMS, vol. 34(12), pages 1416-1424, December.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:ver:wpaper:26/2012. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael Reiter)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.