Scandinavian Working Papers in Economics
Working Papers,
Lund University, Department of Economics
No 2007:16: Risk Exchange as a Market or Production Game
Anders Borglin (anders.borglin@nek.lu.se) and Sjur Flåm (sjur.flaam@econ.uib.no)
Additional contact information
Anders Borglin: Department of Economics, Lund University, Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund, Sweden
Sjur Flåm: Economics Department, Bergen University;, Postal: Economics Department, Bergen University, Bergen, Norway
Abstract: Risk exchange is considered here as a cooperative game with transferable utility. The set-up fits markets for insurance, securities and contingent endowments. When convoluted payoff is concave at the aggregate endowment, there is a price-supported core solution. Under variance aversion the latter mirrors the two-fund separation in allocating to each agent some sure holding plus a fraction of the aggregate.
Keywords: securities; mutual insurance; market or production games; transferable utility; extremal convolution; core solutions; variance or risk aversion; two-fund separation; CAPM
27 pages, October 8, 2007
Full text files
WP07_16.pdf
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