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Stable coalitions in a continuous-time model of risk sharing.

Chade, H. and Taub, B. (2005) 'Stable coalitions in a continuous-time model of risk sharing.', Mathematical social sciences., 50 (1). pp. 24-38.

Abstract

In an economy with a continuum of individuals, each individual has a stochastic, continuously evolving endowment process. Individuals are risk-averse and would therefore like to insure their endowment processes. It is feasible to obtain insurance by pooling endowments across individuals because the processes are mutually independent. We characterize the payoff from an insurance contracting scheme of this type, and we investigate whether such a scheme would survive as an equilibrium in a noncooperative setting. We focus on the stability of cooperative arrangements with respect to the dynamic formation of coalitions. The economy “crystallizes” into a collection of coalitions in equilibrium.

Item Type:Article
Keywords:Coalitions, Risk sharing, Brownian motion, Optimal stopping.
Full text:Full text not available from this repository.
Publisher Web site:http://dx.doi.org/10.1016/j.mathsocsci.2005.02.001
Record Created:09 Aug 2011 09:50
Last Modified:13 Jun 2012 09:21

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