Collective Risk Control and Group Security: The Unexpected Consequences of Differential Risk Aversion
Toshihiro Ihori and Martin McGuire ,
2
( 9 )
Journal of Public Economic Theory
231-263
April
2007
Abstract

We provide an analysis of odds-improving self-protection for when it yields collective benefits to groups, such as alliances of nations, for whom risks of loss are public bads and prevention of loss is a public good. Our analysis of common risk reduction shows how diminishing returns in risk improvement can be folded into income effects.

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