Dynamic Risk Taking With Indivisible Risks

Christian Gollier ()

Working Papers from Risk and Insurance Archive

Abstract: In this paper, we examine second-best efficient allocations of risk when some forms of incompleteness are introduced in risk- sharing contracts. In the first model, there are two independent sources of risk, but risk-sharing contracts can be made contingent to only one of the two sources. We examine the condition under which those who bear the non-transferable risk should bear relatively less of the transferable risk in the economy. Decreasing absolute prudence, i.e. -u'''/u'')'

Keywords: risk sharing; background risk; decreasing prudence. (search for similar items in EconPapers)
Date: 1994-05
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Persistent link: https://EconPapers.repec.org/RePEc:wop:riskar:013

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