Representative Consumer's Risk Aversion and Efficient Risk-Sharing Rules
Chiaki Hara (),
James Huang () and
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James Huang: Department of Accounting and Management, Lancaster University Management School
No 620, KIER Working Papers from Kyoto University, Institute of Economic Research
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)
New Economics Papers: this item is included in nep-cfn, nep-fin and nep-upt
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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 (2007)
Working Paper: Representative Consumer's Risk Aversion and Efficient Risk-Sharing Rules (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:kyo:wpaper:620
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