We consider the market of n financial agents who aim to increase their expected utilities by sharing their random incomes . Given the  optimal sharing rules, we address the situation where agents do not share their true random endowments, but instead they report as endowments the random quantities that maximize their expected utility when the sharing rules are applied. It is shown that this strategic behavior results in a Nash-equilibrium type of agreement among the agents, which implies an inefficient risk sharing. Under quadric utility functionals, we give closed form solutions for this Nash equilibrium and discuss the associated findings. The effect of a similar agents ' strategic behavioris studied in the oligopoly over-the- counter market of finite financial securities, whose equilibrium prices are determined by the equality of demand and supply. The resulting risk sharing inefficiency is even more intense if the agents' participation in the market becomes an endogenous problem. Regarding this issue, we give conditions under which the participation of an extra agent is bene?ficial for all the existed ones. This discussion naturally leads to the problem of sub-group formation in the market, which is addressed for the ?first time in a financial risk sharing literature. A related example under quadratic utility functionals is extensively analyzed .
We consider the market of n financial agents who aim to increase their utilities by efficiently sharing their random endowments . Given the endogenously derived optimal sharing rules, we address the situation where agents do not reveal their true endowments, but instead they report as endowments the random quantities that maximize their utilities when the sharing rules are applied. Under mean-variance preferences, it is shown that each agent should share only a fraction of his true endowment and report that he is exposed to some endowment he does not possess. Furthermore, if all agents follow similar strategic behavior, the market equilibrates at a Nash-type equilibrium which benefits the speculators and results in risk sharing inefficiency . This agents' strategic behavior, when applied to oligopoly markets of exogenously given financial securities, changes the effective market portfolio and implies a price pressure on the traded securities in the CAPM .
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this strategic behavior results in a Nash-equilibrium type of agreement among the agents, which implies an inefficient risk sharing. Under quadric utility functionals, we give closed form solutions for this Nash equilibrium and discuss the associated findings. The effect of a similar agents ' strategic behavioris studied in the oligopoly over-the- counter market of finite financial securities, whose equilibrium prices are determined by the equality of demand and supply. The resulting
each agent should share only a fraction of his true endowment and report that he is exposed to some endowment he does not possess. Furthermore, if all agents follow similar strategic behavior, the market equilibrates at a Nash-type equilibrium which benefits the speculators and results in
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is even more intense if the agents' participation in the market becomes an endogenous problem. Regarding this issue, we give conditions under which the participation of an extra agent is bene?ficial for all the existed ones. This discussion naturally leads to the problem of sub-group formation in the market, which is addressed for the ?first time in a financial risk sharing literature. A related example under quadratic utility functionals is extensively analyzed
. This agents' strategic behavior, when applied to oligopoly markets of exogenously given financial securities, changes the effective market portfolio and implies a price pressure on the traded securities in the CAPM