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Optimal risk-sharing rules and equilibria with Choquet-expected-utility

Tallon, Jean-Marc; Dana, Rose-Anne; Chateauneuf, Alain (2000), Optimal risk-sharing rules and equilibria with Choquet-expected-utility, Journal of Mathematical Economics, 34, 2, p. 191-214. http://dx.doi.org/10.1016/S0304-4068(00)00041-0

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Type
Article accepté pour publication ou publié
Date
2000
Journal name
Journal of Mathematical Economics
Volume
34
Number
2
Publisher
Elsevier
Pages
191-214
Publication identifier
http://dx.doi.org/10.1016/S0304-4068(00)00041-0
Metadata
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Author(s)
Tallon, Jean-Marc cc
Dana, Rose-Anne
Chateauneuf, Alain
Abstract (EN)
This paper explores risk-sharing and equilibrium in a general equilibrium set-up wherein agents are non-additive expected utility maximizers. We show that when agents have the same convex capacity, the set of Pareto-optima is independent of it and identical to the set of optima of an economy in which agents are expected utility maximizers and have the same probability. Hence, optimal allocations are comonotone. This enables us to study the equilibrium set. When agents have different capacities, the matters are much more complex (as in the vNM case). We give a general characterization and show how it simplifies when Pareto-optima are comonotone. We use this result to characterize Pareto-optima when agents have capacities that are the convex transform of some probability distribution. Comonotonicity of Pareto-optima is also shown to be true in the two-state case if the intersection of the core of agents' capacities is non-empty; Pareto-optima may then be fully characterized in the two-agent, two-state case. This comonotonicity result does not generalize to more than two states as we show with a counter-example. Finally, if there is no-aggregate risk, we show that non-empty core intersection is enough to guarantee that optimal allocations are full-insurance allocation. This result does not require convexity of preferences.
Subjects / Keywords
Equilibrium; Risk-sharing; Comonotonicity; Choquet expected utility
JEL
D81 - Criteria for Decision-Making under Risk and Uncertainty
C61 - Optimization Techniques; Programming Models; Dynamic Analysis
C62 - Existence and Stability Conditions of Equilibrium

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