Risk taking under heterogenous risk sharing

Mohamed Belhaj (1, 2) , Frédéric Deroïan (1)

1 GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille
2 ECM - École Centrale de Marseille

We revisit the common view that risk sharing enhances risk taking in the context of heterogenous risk sharing in a small economy. Under low volumes of transfers, we express individual risk level in terms of Bonacich measure. We find that heterogeneity combined to strategic interaction imply that risk sharing enhances risk taking only in average. However, under high transfer volumes, risk sharing may reduce risk taking. We also provide conditions under which agents under or over invest with respect to the risk allocation maximizing the sum of profits.

Mots clés: Risk taking; Heterogenous risk sharing; Strategic Interactions; Bonacich measure

Domaines: Economies et finances

Mohamed Belhaj, Frédéric Deroïan. Risk taking under heterogenous risk sharing. 2009. ⟨halshs-00369889⟩