Discussion Papers, Department of Finance and Management Science, Norwegian School of Economics (NHH)
No 2008/5:
The Nash Bargaining Solution vs. Equilibrium in a Reinsurance Syndicate
Knut K. Aase ()
Abstract: We compare the Nash bargaining solution in a reinsurance
syndicate to the competitive equilibrium allocation, focusing on
uncertainty and risk aversion. Restricting attention to proportional
reinsurance treaties, we find that, although these solution concepts are
very different, one may just appear as a first order Taylor series
approximation of the other, in certain cases. This may be good news for the
Nash solution, or for the equilibrium allocation, all depending upon one’s
point of view.
Our model also allows us to readily identify some
properties of the equilibrium allocation not be shared by the bargaining
solution, and vice versa, related to both risk aversions and
correlations.
Keywords: Nash’s Bargaining Solution; Equilibrium; Pareto Optimal Risk Exchange; Reinsurance Treaties; Uncertainty; Risk Aversion; Correlations; Multinormal Universe; (follow links to similar papers)
JEL-Codes: C10; D81; G22; (follow links to similar papers)
24 pages, May 30, 2008
Before downloading any of the electronic versions below
you should read our statement on
copyright.
Download GhostScript
for viewing Postscript files and the
Acrobat Reader for viewing and printing pdf files.
Full text versions of the paper:
0508.pdf 
Download Statistics
Questions (including download problems) about the papers in this series should be directed to Stein Fossen ()
Report other problems with accessing this service to Sune Karlsson ()
or Helena Lundin ().
Programing by
Design by Joachim Ekebom
