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Aggregate Risk and the Pareto Principle

Al-Najjar, Nabil I. and Pomatto, Luciano (2020) Aggregate Risk and the Pareto Principle. Journal of Economic Theory, 189 . Art. No. 105084. ISSN 0022-0531. https://resolver.caltech.edu/CaltechAUTHORS:20190405-092508707

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Abstract

In the evaluation of public policies, a crucial distinction is between plans that involve purely idiosyncratic risk and those that generate correlated, or aggregate, risk. While natural, this distinction is not captured by standard utilitarian aggregators. In this paper we revisit Harsanyi's (1955) celebrated theory of preferences aggregation and develop a parsimonious generalization of utilitarianism. The theory we propose captures sensitivity to aggregate risk in large populations and can be characterized by two simple axioms of preferences aggregation.


Item Type:Article
Related URLs:
URLURL TypeDescription
https://doi.org/10.1016/j.jet.2020.105084DOIArticle
ORCID:
AuthorORCID
Pomatto, Luciano0000-0002-4331-8436
Additional Information:© 2020 Elsevier Inc. Received 4 November 2018, Revised 13 June 2020, Accepted 16 June 2020, Available online 26 June 2020. We are grateful to the co-editor, Pietro Ortoleva, and to three anonymous referees for their helpful comments. In addition, we thank Larry Blume, Amrita Dhillon, Federico Echenique, Atsushi Kajii, Edi Karni, and Kota Saito.
Classification Code:JEL: D71; D81
Record Number:CaltechAUTHORS:20190405-092508707
Persistent URL:https://resolver.caltech.edu/CaltechAUTHORS:20190405-092508707
Official Citation:Nabil I. Al-Najjar, Luciano Pomatto, Aggregate risk and the Pareto principle, Journal of Economic Theory, Volume 189, 2020, 105084, ISSN 0022-0531, https://doi.org/10.1016/j.jet.2020.105084. (http://www.sciencedirect.com/science/article/pii/S002205312030079X)
Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:94493
Collection:CaltechAUTHORS
Deposited By: Tony Diaz
Deposited On:05 Apr 2019 16:44
Last Modified:14 Jul 2020 22:42

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