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Optimal Risk Sharing Without Preference Convexity: An Aggregate Convexity Approach

Published: August 26, 2025 | arXiv ID: 2509.08832v1

By: Vasily Melnikov

Potential Business Impact:

Helps share risk fairly when many people are involved.

Business Areas:
Collaborative Consumption Collaboration

We consider the optimal risk sharing problem with a continuum of agents, modeled via a non-atomic measure space. Individual preferences are not assumed to be convex. We show the multiplicity of agents induces the value function to be convex, allowing for the application of convex duality techniques to risk sharing without preference convexity. The proof in the finite-dimensional case is based on aggregate convexity principles emanating from Lyapunov convexity, while the infinite-dimensional case uses the finite-dimensional results conjoined with approximation arguments particular to a class of law invariant risk measures, although the reference measure is allowed to vary between agents. Finally, we derive a computationally tractable formula for the conjugate of the value function, yielding an explicit dual representation of the value function.

Page Count
29 pages

Category
Economics:
Theoretical Economics