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When does aggregation reduce uncertainty aversion?

Chambers, Christopher P. and Echenique, Federico (2009) When does aggregation reduce uncertainty aversion? Social Science Working Paper, 1299. California Institute of Technology , Pasadena, CA.

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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)
Chambers, Christopher P.0000-0001-8253-0328
Echenique, Federico0000-0002-1567-6770
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
Funding AgencyGrant Number
Subject Keywords:Uncertainty Aversion, Risk Sharing, Certainty Equivalent, Multiple Priors
Series Name:Social Science Working Paper
Issue or Number:1299
Classification Code:JEL classication numbers: D01,D13
Record Number:CaltechAUTHORS:20101008-104052139
Persistent URL:
Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:20354
Deposited By: Katherine Johnson
Deposited On:08 Oct 2010 17:49
Last Modified:09 Mar 2020 13:18

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