Division of the Humanities and Social Sciences California Institute of Technology Pasadena, California 91125 When Does Aggregation Reduce Uncertainty Aversion?
نویسندگان
چکیده
We study the problem of uncertainty sharing within a household: “risk sharing,” in a context of Knightian uncertainty. A household shares uncertain prospects using a social welfare function. We characterize the social welfare functions such that the household is collectively less averse to uncertainty than each member, and satisfies the Pareto principle and an independence axiom. We single out the sum of certainty equivalents as the unique member of this family which provides quasiconcave rankings over risk-free allocations. JEL classification numbers: D01,D13
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