Efficient Risk Sharing under Limited Commitment and Search Frictions

Junichi Fujimoto and Junsang Lee ()
Additional contact information
Junsang Lee: Sungkyunkwan University

No 16-15, GRIPS Discussion Papers from National Graduate Institute for Policy Studies

Abstract: This paper examines efficient risk sharing under limited commitment and search frictions. The model features a social planner and a continuum of risk-averse workers, where the planner is able to provide consumption only to workers matched with the planner and faces an aggregate resource constraint, while workers can walk away from the match in any period and search for a new match. The formation of new matches and the exogenous destruction of existing ones substantially expand the set of feasible stationary allocations, providing a role for the social welfare function. In the benchmark case of the Benthamite social welfare function, we find that the efficient stationary allocation exhibits novel consumption dynamics: Consumption begins at a relatively low level, converges toward a certain level when the participation constraint is slack, and jumps up when it binds. We then explore the role of limited commitment in generating such rich consumption dynamics.

Pages: 44 pages
Date: 2016-09
New Economics Papers: this item is included in nep-dge, nep-opm and nep-sog
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://grips.repo.nii.ac.jp/?action=repository_ac ... bute_id=20&file_no=1

Related works:
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:ngi:dpaper:16-15

Access Statistics for this paper

More papers in GRIPS Discussion Papers from National Graduate Institute for Policy Studies Contact information at EDIRC.
Bibliographic data for series maintained by ( this e-mail address is bad, please contact ).