Individual Risk and Lebesgue Extension without Aggregate Uncertainty

Yeneng Sun and Yongchao Zhang ()

MPRA Paper from University Library of Munich, Germany

Abstract: Many economic models include random shocks imposed on a large number (continuum) of economic agents with individual risk. In this context, an exact law of large numbers and its converse is presented in Sun (2006) to characterize the cancelation of individual risk via aggregation. However, it is well known that the Lebesgue unit interval is not suitable for modeling a continuum of agents in the particular setting. The purpose of this note is to show that an extension of the Lebesgue unit interval does work well as an agent space with various desirable properties associated with individual risk.

Keywords: No aggregate uncertainty; independence; exact law of large numbers; Fubini extension; Lebesgue measure (search for similar items in EconPapers)
JEL-codes: C43 C60 D80 E00 (search for similar items in EconPapers)
Date: 2008-02-28
New Economics Papers: this item is included in nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Individual risk and Lebesgue extension without aggregate uncertainty (2009)
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