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How Do Households Allocate Risk?

Christoph Engel (), Alexandra Fedorets and Olga Gorelkina

No 20186, Working Papers from University of Liverpool, Department of Economics

Abstract: Individuals often have to decide to which degree of risk they want to expose others, or how much risk to accept if their choice has an externality on third parties. One typical application is a household. We run an experiment in the German Socio-Economic Panel with two members from 494 households. Participants have a good estimate of each other’s risk preferences, even if not explicitly informed. They do not simply match this preference when deciding on behalf of the other household member, but shy away from exposing others to risk. We model the situation, and we find four distinct types of individuals, and two distinct types of households.

Keywords: risk preference; household; reticence to expose others to risk; tradeoff between individual and foreign risk preference (search for similar items in EconPapers)
JEL-codes: C45 D13 D81 D91 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2018-11
New Economics Papers: this item is included in nep-cbe, nep-cdm, nep-exp, nep-ore and nep-upt
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https://www.liverpool.ac.uk/media/livacuk/schoolof ... ds-allocate-risk.pdf First version, 2018 (application/pdf)

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