This paper shows that the value function describing efficient risk sharing with limited commitment is not necessarily differentiable everywhere. We link differentiability of the value function to history dependence of efficient allocations and provide sufficient conditions for both properties.
Abraham, Arpad / Carceles-Poveda , Eva / Cavalcanti, Tiago / Kambourov, Gueorgui / Lambertini, Luisa / Ruhl, Kim / Tavares, Jose
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Differentiability of the Efficient Frontier when Commitment to Risk Sharing is Limited
Thorsten V. Koeppl1
1Department of Economics, Queen’s University, Kingston, Ontario, thor@econ.queensu.ca
Citation Information: Topics in Macroeconomics. Volume 6, Issue 1, Pages 1–6, ISSN (Online) 1534-5998, DOI: 10.2202/1534-5998.1419, April 2006
Publication History:
- Published Online:
- 2006-04-19
Keywords: risk sharing; limited commitment; differentiability
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