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

Chiaki Hara (hara@kier.kyoto-u.ac.jp), 千秋 原, チアキ ハラ, James Huang 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)
Pages: 27 pages
Date: 2007-03
Note: November 6, 2006
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (20)

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https://hermes-ir.lib.hit-u.ac.jp/hermes/ir/re/14542/pie_dp323.pdf

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

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