Collective risk aversion

Elyès Jouini (), Clotilde Napp and Diego Nocetti

Post-Print from HAL

Abstract: In this paper we analyse the risk attitude of a group of heterogenous agents and we develop a theory of comparative collective risk tolerance. In particular, we characterize how shifts in the distribution of individual levels of risk tolerance affect the representative agent's degree of risk tolerance. In the model with efficient risk - sharing and two agents (e.g. a household) with isoelastic preferences we show that an increase of the level of risk tolerance of one of the agents might have an ambiguous impact on the aggregate level of risk tolerance; the latter increases for some levels of aggregate wealth while it decreases for other levels of aggregate wealth. Specifically, there are two possible shapes for aggregate risk tolerance as a function of the risk tolerance level of one of the agents: increasing curve or increasing then decreasing curve. For more general populations we characterize the effect of first order like shifts (individual levels of risk tolerance more concentrated on high values) and second order like shifts (more dispersion on individual levels of risk tolerance) on the collective level of risk tolerance. We also evaluate how shifts in the distribution of individual levels of risk tolerance impact the collective level of risk tolerance in a framework with exogenous egalitarian sharing rules. Our results permit to better characterize differences in risk taking behavior between groups and individuals and among groups with different distribution of risk preferences.

Keywords: heterogenous agents; collective risk; risk tolerance; isoelastic preferences; aggregate wealth; risk preferences (search for similar items in EconPapers)
Date: 2013-02-01
New Economics Papers: this item is included in nep-mic and nep-upt
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00559137v2
References: Add references at CitEc
Citations: View citations in EconPapers (7)

Published in Social Choice and Welfare, 2013, 40 (2), pp.411-437

Downloads: (external link)
https://shs.hal.science/halshs-00559137v2/document (application/pdf)

Related works:
Journal Article: Collective risk aversion (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-00559137

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().