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Linear sharing rules

Research output: Working paper

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Abstract

We derive necessary and sufficient conditions for a Pareto optimal sharing rule to be linear in wealth and for all Pareto optimal sharing rules to be linear in wealth. We also show that when agents belief have a particular feature a Pareto optimal sharing rule is linear in wealth if and only if all Pareto optimal sharing rules are linear. The results obtained in this paper generalize those on linear sharing rules in the existing literature. Unlike the special case when aggregate wealth is dependent on a state variable, even if all Pareto optimal sharing rules are linear it is not necessary that agents utility functions be of the equicautous HARA class.