Representative Consumer's Risk Aversion and Efficient Risk-Sharing Rules

Hara Chiaki, Huang James and Christoph Kuzmics

No 323, Discussion Paper from Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University

Abstract: We study the representative consumer's risk attitude and efficient risk-sharing rules in a singleperiod, single-good economy in which consumers have homogeneous probabilistic beliefs but heterogeneous risk attitudes. We prove that if all consumers have convex absolute risk tolerance, so must the representative consumer. We also identify a relationship between the curvature of an individual consumer's individual risk sharing rule and his absolute cautiousness, the first derivative of absolute risk-tolerance. Furthermore, we discuss some consequences of these results and refinements of these results for the class of HARA utility functions.

Keywords: Aggregation; heterogeneous consumers; absolute risk tolerance; mutual fund theorem (search for similar items in EconPapers)
JEL-codes: D51 D58 D81 G11 G12 G13 (search for similar items in EconPapers)
Date: 2007-03
Note: November 6, 2006
View citations in EconPapers

Downloads: (external link)
http://hermes-ir.lib.hit-u.ac.jp/rs/bitstream/10086/14542/1/pie_dp323.pdf (application/pdf)

Related works:
Working Paper: Representative Consumer's Risk Aversion and Efficient Risk-Sharing Rules (2004)
Working Paper: Representative Consumer’s Risk Aversion and Efficient Risk-Sharing Rules (2006)
Journal Article: Representative consumer's risk aversion and efficient risk-sharing rules (2007)
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: http://EconPapers.repec.org/RePEc:hit:piedp2:323

Access Statistics for this paper

More papers in Discussion Paper from Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University
Contact information at EDIRC.
Series data maintained by Koji OHTAGAKI ().