Individual risk and Lebesgue extension without aggregate uncertainty

DOI10.1016/J.JET.2008.05.001MaRDI QIDQ1001836zbMATH OpenOpenAlexFDO

Authors Yeneng Sun, Yong-Chao Zhang

Publication date 19 February 2009

Published in Journal of Economic Theory (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/0803.0442

zbMATH Keywords

exact law of large numbersFubini extensionindependenceLebesgue measureno aggregate uncertainty

Mathematics Subject Classification ID

Strong limit theorems (60F15)

Abstract: Many economic models include random shocks imposed on a large number (continuum) of economic agents with individual risk. In this context, an exact law of large numbers and its converse is presented in Sun (2006) to characterize the cancelation of individual risk via aggregation. However, it is well known that the Lebesgue unit interval is not suitable for modeling a continuum of agents in the particular setting. The purpose of this paper is to show that an extension of the Lebesgue unit interval does work well as an agent space with various desirable properties associated with individual risk.

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Cited in

(33)

• The decomposition of risk in denumerable populations with ex ante identical individuals
• Weak measurability and characterizations of risk
• The generalized random priority mechanism with budgets
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