Dynamic Risk Taking With Indivisible Risks
In this paper, we examine second-best efficient allocations of risk when some forms of incompleteness are introduced in risk- sharing contracts. In the first model, there are two independent sources of risk, but risk-sharing contracts can be made contingent to only one of the two sources. We examine the condition under which those who bear the non-transferable risk should bear relatively less of the transferable risk in the economy. Decreasing absolute prudence, i.e. -u'''/u'')'
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|Date of creation:||May 1994|
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- Dreze, Jacques H. & Gollier, Christian, 1993.
"Risk sharing on the labour market and second-best wage rigidities,"
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- DREZE, Jacques & GOLLIER, Christian, . "Risk sharing on the labour market and second-best wage rigidities," CORE Discussion Papers RP -1073, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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- Miles S. Kimball, 1991.
"Standard Risk Aversion,"
NBER Technical Working Papers
0099, National Bureau of Economic Research, Inc.
- Eeckhoudt, Louis & Gollier, Christian & Levasseur, Michel, 1993. " The Economics of Adding and Subdividing Independent Risks: Some Comparative Statics Results," Journal of Risk and Uncertainty, Springer, vol. 7(3), pages 325-37, December.
- Gollier, Christian & John W. PRATT, 1993. "Weak Proper Risk Aversion And The Tempering Effect of Background Risk," Working Papers 018, Risk and Insurance Archive.
- Meade, James E, 1972. "The Theory of Labour-Managed Firms and of Profit Sharing," Economic Journal, Royal Economic Society, vol. 82(325), pages 402-28, Supplemen.
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