Egalitarian Equivalent Capital Allocation

17 Pages Posted: 11 Apr 2015

See all articles by Shinichi Kamiya

Shinichi Kamiya

Nanyang Business School, Nanyang Technological University

George H. Zanjani

University of Alabama - Department of Economics, Finance and Legal Studies

Date Written: April 9, 2015

Abstract

We apply Moulin’s notion of egalitarian equivalent cost sharing of a public good to the problem of insurance capitalization and capital allocation where the liability portfolio is fixed. We show that this approach yields overall capitalization and cost allocations that are Pareto efficient, individually rational, and, unlike other mechanisms, stable in the sense of adhering to cost monotonicity.

Keywords: Insurance, capital allocation, public good

JEL Classification: G11, G22, H41

Suggested Citation

Kamiya, Shinichi and Zanjani, George H., Egalitarian Equivalent Capital Allocation (April 9, 2015). Available at SSRN: https://ssrn.com/abstract=2592475 or http://dx.doi.org/10.2139/ssrn.2592475

Shinichi Kamiya (Contact Author)

Nanyang Business School, Nanyang Technological University ( email )

Singapore, 639798
Singapore

George H. Zanjani

University of Alabama - Department of Economics, Finance and Legal Studies ( email )

361 Stadium Dr, Ste 200
Tuscaloosa, AL 35487
United States

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