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Assortative matching of risk-averse agents with endogenous risk created by Sanxi Li, Hailin Sun and Pu Chen

By: Contributor(s): Material type: TextTextSeries: Journal of Economics ; Volume 109, number 1Heidelberg: Springer, 2013Content type:
  • text
Media type:
  • unmediated
Carrier type:
  • volume
ISSN:
  • 09318658
Subject(s): LOC classification:
  • HB171.5 JOU
Online resources: Abstract: A standard risk-sharing matching game predicts negative assortative matching over agents’ risk attitudes. In regards to risk sharing, less risk-averse agents prefer highly risk-averse partners, who pay a high risk premium. Negative sorting is, however, inconsistent with empirical and experimental literature. To resolve this conflict, we propose a model where agents can control the risks to their incomes. In regards to risk management, agents prefer similar partners because of their aligned objectives in risk management. When it is easy to control risks or all agents are sufficiently risk-averse, the risk-management effect dominates, leading to positive sorting.
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Item type Current library Call number Vol info Copy number Status Notes Date due Barcode
Journal Article Journal Article Main Library - Special Collections HB171.5 JOU (Browse shelf(Opens below)) Vol. 109, no. 1 (pages 27-40) SP20885 Not for loan For In house Use

A standard risk-sharing matching game predicts negative assortative matching over agents’ risk attitudes. In regards to risk sharing, less risk-averse agents prefer highly risk-averse partners, who pay a high risk premium. Negative sorting is, however, inconsistent with empirical and experimental literature. To resolve this conflict, we propose a model where agents can control the risks to their incomes. In regards to risk management, agents prefer similar partners because of their aligned objectives in risk management. When it is easy to control risks or all agents are sufficiently risk-averse, the risk-management effect dominates, leading to positive sorting.

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