IDEAS home Printed from https://ideas.repec.org/p/red/sed007/637.html
   My bibliography  Save this paper

Anonymity and Individual Risk

Author

Listed:
  • Pamela Labadie

    (George Washington University)

Abstract

Anonymity in the market place is a cornerstone of the standard competitive equilibrium framework in which agents are assumed to be price takers. Anonymity is formally incorporated into the model by assuming that the central planner is unable to determine who is who, even though the planner knows the distribution of individual risks and characteristics of the economy. The constrained Pareto optimal allocation has the property that it is envy-free in that there are fair net trades for all agents. This results in a conflict between equity and efficiency. The allocation, which also has the property that it is coalitionally fair, will result in a distribution of the intertemporal marginal rate of substitution across heterogeneous agents. This has strong implications for the stochastic discount factor used in dynamic, stochastic general equilibrium models.

Suggested Citation

  • Pamela Labadie, 2007. "Anonymity and Individual Risk," 2007 Meeting Papers 637, Society for Economic Dynamics.
    • Handle: RePEc:red:sed007:637
    as

    Download full text from publisher

    File URL: https://red-files-public.s3.amazonaws.com/meetpapers/2007/paper_637.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Kehoe, Timothy J & Levine, David K, 2001. "Liquidity Constrained Markets versus Debt Constrained Markets," Econometrica, Econometric Society, vol. 69(3), pages 575-598, May.
    2. Haubrich, Joseph G, 1988. "Optimal Financial Structure in Exchange Economies," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 29(2), pages 217-235, May.
    3. Timothy J. Kehoe & David K. Levine, 2000. "Liquidity Constrained vs. Debt Constrained Markets," Levine's Working Paper Archive 14, David K. Levine.
    4. Hansen, Lars Peter & Jagannathan, Ravi, 1991. "Implications of Security Market Data for Models of Dynamic Economies," Journal of Political Economy, University of Chicago Press, vol. 99(2), pages 225-262, April.
    5. S. Rao Aiyagari, 1994. "Uninsured Idiosyncratic Risk and Aggregate Saving," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 109(3), pages 659-684.
    6. John H. Boyd & Edward C. Prescott & Bruce D. Smith, 1988. "Organizations in Economic Analysis," Canadian Journal of Economics, Canadian Economics Association, vol. 21(3), pages 477-491, August.
    7. Wright, Randall D., 1987. "Market structure and competitive equilibrium in dynamic economic models," Journal of Economic Theory, Elsevier, vol. 41(1), pages 189-201, February.
    8. Timothy J. Kehoe & David K. Levine, 1993. "Debt-Constrained Asset Markets," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 60(4), pages 865-888.
    9. Fernando Alvarez & Urban J. Jermann, 2005. "Using Asset Prices to Measure the Persistence of the Marginal Utility of Wealth," Econometrica, Econometric Society, vol. 73(6), pages 1977-2016, November.
    10. Michael Rothschild & Joseph Stiglitz, 1976. "Equilibrium in Competitive Insurance Markets: An Essay on the Economics of Imperfect Information," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 90(4), pages 629-649.
    11. Fernando Alvarez & Urban J. Jermann, 2000. "Efficiency, Equilibrium, and Asset Pricing with Risk of Default," Econometrica, Econometric Society, vol. 68(4), pages 775-798, July.
    12. Rao Aiyagari, S. & Peled, Dan, 1991. "Dominant root characterization of Pareto optimality and the existence of optimal equilibria in stochastic overlapping generations models," Journal of Economic Theory, Elsevier, vol. 54(1), pages 69-83, June.
    13. Narayana R. Kocherlakota, 1996. "Implications of Efficient Risk Sharing without Commitment," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 63(4), pages 595-609.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Igor Livshits, 2015. "Recent Developments In Consumer Credit And Default Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 29(4), pages 594-613, September.
    2. Krueger, Dirk & Perri, Fabrizio, 2011. "Public versus private risk sharing," Journal of Economic Theory, Elsevier, vol. 146(3), pages 920-956, May.
    3. Krueger, Dirk & Uhlig, Harald, 2022. "Neoclassical Growth with Limited Commitment," CEPR Discussion Papers 17757, C.E.P.R. Discussion Papers.
    4. Bloise, Gaetano & Polemarchakis, Herakles & Vailakis, Yiannis, 2018. "Sustainable Debt," CRETA Online Discussion Paper Series 45, Centre for Research in Economic Theory and its Applications CRETA.
    5. Gordon, Grey, 2017. "Optimal bankruptcy code: A fresh start for some," Journal of Economic Dynamics and Control, Elsevier, vol. 85(C), pages 123-149.
    6. Dirk Krueger & Harald Uhlig, 2022. "Neoclassical Growth with Long-Term One-Sided Commitment Contracts," NBER Working Papers 30518, National Bureau of Economic Research, Inc.
    7. Patrick J. Kehoe & Fabrizio Perri, 2002. "International Business Cycles with Endogenous Incomplete Markets," Econometrica, Econometric Society, vol. 70(3), pages 907-928, May.
    8. Emil Iantchev, 2013. "Asset-Pricing Implications of Biologically Based Non-Expected Utility," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(3), pages 497-510, July.
    9. Díaz, Antonia & Perera-Tallo, Fernando, 2011. "Credit and inflation under borrowerʼs lack of commitment," Journal of Economic Theory, Elsevier, vol. 146(5), pages 1888-1914, September.
    10. Dirk Krueger & Fabrizio Perri, 2002. "Does Income Inequality Lead to Consumption Inequality? Evidence and Theory," NBER Working Papers 9202, National Bureau of Economic Research, Inc.
    11. Dirk Krueger, 2006. "Public Insurance against Idiosyncratic and Aggregate Risk: The Case of Social Security and Progressive Income Taxation," CESifo Economic Studies, CESifo Group, vol. 52(4), pages 587-620, December.
    12. Rampini, Adriano A. & Viswanathan, S., 2018. "Financing Insurance," CEPR Discussion Papers 12855, C.E.P.R. Discussion Papers.
    13. Acemoglu, Daron & Golosov, Mikhail & Tsyvinski, Aleh, 2008. "Markets versus governments," Journal of Monetary Economics, Elsevier, vol. 55(1), pages 159-189, January.
    14. Bloise, Gaetano & Reichlin, Pietro, 2011. "Asset prices, debt constraints and inefficiency," Journal of Economic Theory, Elsevier, vol. 146(4), pages 1520-1546, July.
    15. Alvaro Aguirre, 2017. "Contracting Institutions and Economic Growth," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 24, pages 192-217, March.
    16. Challe, Edouard & Le Grand, François & Ragot, Xavier, 2013. "Incomplete markets, liquidation risk, and the term structure of interest rates," Journal of Economic Theory, Elsevier, vol. 148(6), pages 2483-2519.
    17. Charles Engel & JungJae Park, 2022. "Debauchery and Original Sin: The Currency Composition of Sovereign Debt," Journal of the European Economic Association, European Economic Association, vol. 20(3), pages 1095-1144.
    18. Andolfatto, David & Gervais, Martin, 2008. "Endogenous debt constraints in a life-cycle model with an application to social security," Journal of Economic Dynamics and Control, Elsevier, vol. 32(12), pages 3745-3759, December.
    19. Seppala, Juha, 2004. "The term structure of real interest rates: theory and evidence from UK index-linked bonds," Journal of Monetary Economics, Elsevier, vol. 51(7), pages 1509-1549, October.
    20. Fernández-Villaverde, Jesús & Krueger, Dirk, 2011. "Consumption And Saving Over The Life Cycle: How Important Are Consumer Durables?," Macroeconomic Dynamics, Cambridge University Press, vol. 15(5), pages 725-770, November.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:red:sed007:637. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Christian Zimmermann (email available below). General contact details of provider: https://edirc.repec.org/data/sedddea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.