Risk taking under heterogenous risk sharing

Mohamed Belhaj () and Frédéric Deroïan ()

Working Papers from HAL

Abstract: We revisit the common view that risk sharing enhances risk taking in the context of heterogenous risk sharing in a small economy. Under low volumes of transfers, we express individual risk level in terms of Bonacich measure. We find that heterogeneity combined to strategic interaction imply that risk sharing enhances risk taking only in average. However, under high transfer volumes, risk sharing may reduce risk taking. We also provide conditions under which agents under or over invest with respect to the risk allocation maximizing the sum of profits.

Keywords: Risk taking; Heterogenous risk sharing; Strategic Interactions; Bonacich measure (search for similar items in EconPapers)
Date: 2009-03-22
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00369889v1
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