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| Author: | Cass, D. Chichilnisky, G. Wu, H.-M. |
| Title: | Individual risk and mutual insurance |
| Journal: | Econometrica
1996 : MAR, VOL. 64:2, p. 333-342 |
| Index terms: | ECONOMETRICS RISK INSURANCE |
| Language: | eng |
| Abstract: | this paper examines how, in the presence of individual risk, economic efficiency can be achieved without an unrealistically large number of contingent claims. Market uncertainty is specified in such a way that general types of individual risk and collective risk are properly accounted for and so that, specifically, market clearing is always satisfied ex post as well as ex ante. The authors show that consistency of beliefs and optimality of allocation can be guaranteed with an appropriate array of pure Arrow securities to spread collective risk and mutual insurance policies to pool individual risk. |
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