Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
957076 | Journal of Economic Theory | 2007 | 21 Pages |
Abstract
We study the representative consumer's risk attitude and efficient risk-sharing rules in a single-period, single-good economy in which consumers have homogeneous probabilistic beliefs but heterogeneous risk attitudes. We prove that if all consumers have convex absolute risk tolerance, so must the representative consumer. We also identify a relationship between the curvature of an individual consumer's individual risk sharing rule and his absolute cautiousness, the first derivative of absolute risk-tolerance. Furthermore, we discuss some consequences of these results and refinements of these results for the class of HARA utility functions.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Chiaki Hara, James Huang, Christoph Kuzmics,