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RISK REDISTRIBUTION GAMES WITH DUAL UTILITIES

Published online by Cambridge University Press:  21 November 2016

Tim J. Boonen
Tim J. Boonen*
Affiliation:
Amsterdam School of Economics, University of Amsterdam, Roetersstraat 11, 1018 WB, Amsterdam, The Netherlands
*
E-Mail: t.j.boonen@uva.nl
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Abstract

This paper studies optimal risk redistribution between firms, such as institutional investors, banks or insurance companies. We consider the case where every firm uses dual utility (also called a distortion risk measure) to evaluate risk. We characterize optimal risk redistributions via four properties that need to be satisfied jointly. The characterized risk redistribution is unique under three conditions. Whereas we characterize risk redistributions by means of properties, we can also use some results to study competitive equilibria. We characterize uniqueness of the competitive equilibrium in markets with dual utilities. Finally, we identify two conditions that are jointly necessary and sufficient for the case that there exists a trade that is welfare-improving for all firms.

Keywords

Dual utilitymarket gamesrisk sharingcompetitive equilibriano-trade
Type
Research Article
Information
ASTIN Bulletin: The Journal of the IAA , Volume 47 , Issue 1 , January 2017 , pp. 303 - 329
Copyright
Copyright © Astin Bulletin 2016 

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