Activities per year
This paper explores the sorting patterns in a two-sided matching market where agents facing different risks match to share them. When preference belongs to the class of harmonic absolute risk aversion (HARA), the risk premium is perfectly transferable within each partnership; thus a stable match minimizes the social cost of risk. In the systematic risk model, where agents are ranked by their holdings of a common risky asset, the convexity of the joint risk premium in joint risk size leads to negative assortative matching (NAM). In the idiosyncratic risk model, where agents are ranked by their independent riskiness in the sense of second-order stochastic dominance (SSD), NAM arises when preference exhibits decreasing absolute risk aversion (DARA) in the sense of Ross and riskier background risk leads to more risk-averse behavior. However, NAM may fail to arise when riskier background risk leads to more risk-tolerant behavior.
|Journal||Journal of Economic Theory|
|Early online date||29 Jan 2016|
|Publication status||Published - May 2016|
FingerprintDive into the research topics of 'Assortative matching and risk sharing'. Together they form a unique fingerprint.
- 1 Participation in conference
11th Econometric Society of World Congress
Tong Wang (Speaker)20 Aug 2015
Activity: Participating in or organising an event types › Participation in conference
- Business School - Senior Lecturer
- Management Science and Business Economics
Person: Academic: Research Active