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On the Necessary Condition for Linear Sharing and Separation: A Note

Published online by Cambridge University Press:  06 April 2009

Chi-fu Huang and
Robert Litzenberger
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Abstract

A necessary and sufficient condition for linear sharing rules to be Pareto optimal, as generally accepted by the finance community, is that utility functions be of the equicautious HARA class. We demonstrate that this condition is not necessary for a fixed distribution of initial endowments and derive the necessary and sufficient condition. We show examples of utility functions satisfying our conditions.

Information

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 20 , Issue 3 , September 1985, pp. 381 - 384
Copyright
Copyright © School of Business Administration, University of Washington 1985

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