Strategy-proof risk sharing

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Abstract

We consider risk sharing problems with a single good and a finite number of states. Agents have a common prior and their preferences are represented in the expected utility form and are risk averse. We study efficient and individually rational risk sharing rules satisfying strategy-proofness, the requirement that no one can ever benefit by misrepresenting his preference. When aggregate certainty holds, we show that "fixed price selections" from Walrasian correspondence are the only rules satisfying efficiency, individual rationality, and strategy-proofness. However, when aggregate uncertainty holds, we show that there exists no rule satisfying the three requirements. Moreover, in the two agents case, we show that dictatorial rules are the only efficient and strategy-proof rules. Dropping the common prior assumption in the model, we show that this assumption is necessary and sufficient for the existence of rules satisfying the three main requirements in the two agents and aggregate certainty case. © 2004 Elsevier Inc. All rights reserved.

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APA

Ju, B. G. (2005). Strategy-proof risk sharing. Games and Economic Behavior, 50(2), 225–254. https://doi.org/10.1016/j.geb.2004.02.004

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