Related papers: Optimal risk sharing, equilibria, and welfare with…

In economic theory, the concept of externality refers to any indirect effect resulting from an interaction between players that affects the social welfare. Most of the models within which externality has been studied assume that agents have…

We provide sufficient conditions for semi-nonparametric point identification of a mixture model of decision making under risk, when agents make choices in multiple lines of insurance coverage (contexts) by purchasing a bundle. As a first…

A framework for risk-averse optimization problems is introduced that is resilient to ambiguities in the true form of the underlying probability distribution. The focus is on problems with partial differential equations (PDEs) as…

We consider an investor who wants to select her/his optimal consumption, investment and insurance policies. Motivated by new insurance products, we allow not only the financial marke but also the insurable loss to depend on the regime of…

In high-risk environments, traditional indemnity insurance is often unaffordable or ineffective, despite its well-known optimality under expected utility. We compare excess-of-loss indemnity insurance with parametric insurance within a…

Some researchers speculate that intelligent reinforcement learning (RL) agents would be incentivized to seek resources and power in pursuit of their objectives. Other researchers point out that RL agents need not have human-like…

Most people are risk-averse (risk-seeking) when they expect to gain (lose). Based on a generalization of ``expected utility theory'' which takes this into account, we introduce an automaton mimicking the dynamics of economic operations.…

Based on a point of view that solvency and security are first, this paper considers regular-singular stochastic optimal control problem of a large insurance company facing positive transaction cost asked by reinsurer under solvency…

This article proposes a new class of risk-sharing rules by exploring the relationship between capital allocation and risk sharing. While the former is concerned with ex-ante allocating capitals to different lines of business within a…

We introduce a strategic behavior in reinsurance bilateral transactions, where agents choose the risk preferences they will appear to have in the transaction. Within a wide class of risk measures, we identify agents' strategic choices to a…

This paper discusses an alternative explanation for the empirical findings contradicting the positive relationship between risk (variance) and reward (expected return). We show that these contradicting results might be due to the false…

We study the effects of data sharing between firms on prices, profits, and consumer welfare. Although indiscriminate sharing of consumer data decreases firm profits due to the subsequent increase in competition, selective sharing can be…

We consider the economic problem of optimal consumption and investment with power utility. We study the optimal strategy as the relative risk aversion tends to infinity or to one. The convergence of the optimal consumption is obtained for…

Cybersecurity risk management consists of several steps including the selection of appropriate controls to minimize risks. This is a difficult task that requires to search through all possible subsets of a set of available controls and…

In this paper we study the optimal investment and reinsurance problem of an insurance company whose investment preferences are described via a forward dynamic exponential utility in a regime-switching market model. Financial and actuarial…

Cooperation is fundamental for society's viability, as it enables the emergence of structure within heterogeneous groups that seek collective well-being. However, individuals are inclined to defect in order to benefit from the group's…

In this paper, we study moral hazard problems in contract theory by adding an exogenous Planner to manage the actions of Agents hired by a Principal. We provide conditions ensuring that Pareto optima exist for the Agents using the…

Ergodicity describes an equivalence between the expectation value and the time average of observables. Applied to human behaviour, ergodic theories of decision-making reveal how individuals should tolerate risk in different environments. To…

We study the optimal investment-reinsurance problem in the context of equity-linked insurance products. Such products often have a capital guarantee, which can motivate insurers to purchase reinsurance. Since a reinsurance contract implies…

We analyze the limiting behavior of the risk premium associated with the Pareto optimal risk sharing contract in an infinitely expanding pool of risks under a general class of law-invariant risk measures encompassing rank-dependent utility…