Risk sharing under heterogeneous beliefs without convexity

Felix-Benedikt Liebrich ()
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Felix-Benedikt Liebrich: Amsterdam School of Economics

Finance and Stochastics, 2024, vol. 28, issue 4, No 3, 999-1033

Abstract: Abstract We consider the problem of finding (Pareto-)optimal allocations of risk among finitely many agents. The associated individual risk measures are law-invariant, but with respect to agent-dependent and potentially heterogeneous reference probability measures. Moreover, we assume that the individual risk assessments are consistent with the respective second-order stochastic dominance relations, but remain agnostic about their convexity. A simple sufficient condition for the existence of Pareto optima is provided. The proof combines local comonotonic improvement with a Dieudonné-type argument, which also establishes a link of the optimal allocation problem to the realm of “collapse to the mean” results.

Keywords: Risk sharing; (Pareto-)optimal allocations; Consistent risk measures; Star-shaped risk measures; 60E15; 91B32; 91G70 (search for similar items in EconPapers)
JEL-codes: D50 D81 G20 (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (5)

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DOI: 10.1007/s00780-024-00540-6

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