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Matching to Share Risk without Commitment

Gierlinger, J and Laczo, Sarolta (2017) Matching to Share Risk without Commitment Economic Journal.

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Abstract

This paper studies the effect of limited commitment on sorting when two sides of a frictionless market form pairs to share risk. On each side, agents are identical except for their risk preferences. First, we provide analytical results when transfers do not condition on the history of shocks. More risk-averse agents can commit to larger transfers, as long as their consumption is less risky than their endowment. With sufficiently large idiosyncratic risk and sufficient discounting of the future, matching is positive assortative, unlike under full commitment. Second, we find positive-assortative stable matchings when transfers are history dependent using a numerical algorithm.

Item Type: Article
Subjects : Economics
Divisions : Faculty of Arts and Social Sciences > School of Economics
Authors :
NameEmailORCID
Gierlinger, J
Laczo, Saroltas.laczo@surrey.ac.uk
Date : 2 September 2017
Identification Number : 10.1111/ecoj.12490
Copyright Disclaimer : This is the peer reviewed version of the following article: Gierlinger, J. and Laczó, S. (2017), Matching to Share Risk without Commitment. Econ J. doi:10.1111/ecoj.12490, which has been published in final form at http://onlinelibrary.wiley.com/doi/10.1111/ecoj.12490/full. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving.
Uncontrolled Keywords : assortative matching, imperfectly transferable utility, risk sharing, limited commitment
Related URLs :
Depositing User : Symplectic Elements
Date Deposited : 04 Jan 2017 12:21
Last Modified : 24 Nov 2017 15:25
URI: http://epubs.surrey.ac.uk/id/eprint/813193

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