Matching to Share Risk without Commitment

Bibliographic Data

ID9703895
AuthorsJohannes Gierlinger (0000-0002-9615-4076, Universitat Autònoma de Barcelona‐MOVE and Barcelona GSE), Sarolta Laczó (University of Surrey, IAE‐CSIC, and CEPR, corresponding author)
Year2018
Volume128
Issue613
Pages2003-2031
Publication date2018-08-01
Open AccessYes
TypeARTICLE
VenueThe Economic Journal (JOURNAL)
Journal identifiersISSN: 0013-0133 • E-ISSN: 1468-0297
PublisherOxford University Press (OUP) (PUBLISHER)
DOI10.1111/ecoj.12490
OpenAlexW2586915459
LanguageEN
Citations received1
References cited27

This paper studies the effect of limited commitment on sorting when two sides of a frictionless market form pairs to share risk. On each side, agents are identical except for their risk preferences. First, we provide analytical results when transfers do not condition on the history of shocks. More risk-averse agents can commit to larger transfers, as long as their consumption is less risky than their endowment. With sufficiently large idiosyncratic risk and sufficient discounting of the future, matching is positive assortative, unlike under full commitment. Second, we find positive-assortative stable matchings when transfers are history dependent using a numerical algorithm

Commit · Consumption (sociology · Discounting · Econometrics · Economics · Endowment · Matching (statistics · Microeconomics · Sorting · Systematic risk · Computer Science · Economic theories and models · Financial Literacy, Pension, Retirement Analysis · Gender, Labor, and Family Dynamics · Mathematics

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