When does aggregation reduce risk aversion?

We study the problem of risk sharing within a household or syndicate. A household shares risky prospects using a social welfare functional. We characterize the social welfare functionals such that the household is collectively less risk averse than each member, and satisfies the Pareto principle and an invariance axiom. We single out the sum of certainty equivalents as the unique member of this family which is quasiconcave over riskless allocations.

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Year of publication:	2012
Authors:	Chambers, Christopher P. ; Echenique, Federico
Published in:	Games and Economic Behavior. - Elsevier, ISSN 0899-8256. - Vol. 76.2012, 2, p. 582-595
Publisher:	Elsevier
Subject:	Certainty equivalent \| Aggregation \| Risk aversion \| Sum of individual certainty equivalents

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Type of publication:	Article
Classification:	D11 - Consumer Economics: Theory ; D6 - Welfare Economics ; D71 - Social Choice; Clubs; Committees; Associations ; D81 - Criteria for Decision-Making under Risk and Uncertainty
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10010588267