Chambers, Christopher P. and Echenique, Federico (2009) When does aggregation reduce uncertainty aversion? Social Science Working Paper, 1299. California Institute of Technology , Pasadena, CA. http://resolver.caltech.edu/CaltechAUTHORS:20101008-104052139
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We study the problem of uncertainty sharing within a household: "risk sharing," in a context of Knightian uncertainty. A household shares uncertain prospects using a social welfare function. We characterize the social welfare functions such that the household is collectively less averse to uncertainty than each member, and satises the Pareto principle and an independence axiom. We single out the sum of certainty equivalents as the unique member of this family which provides quasiconcave rankings over risk-free allocations.
|Item Type:||Report or Paper (Working Paper)|
|Additional Information:||From Author's copy: We thank David Ahn, Kim Border, and Massimo Marinacci for comments, and SangMok Lee for excellent research assistance. Our research was supported by the National Science Foundation through grant SES-0751980.|
|Group:||Social Science Working Papers|
|Subject Keywords:||Uncertainty Aversion, Risk Sharing, Certainty Equivalent, Multiple Priors|
|Classification Code:||JEL classication numbers: D01,D13|
|Usage Policy:||No commercial reproduction, distribution, display or performance rights in this work are provided.|
|Deposited By:||Shirley Johnson|
|Deposited On:||08 Oct 2010 17:49|
|Last Modified:||26 Dec 2012 12:30|
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