Risky Asset Bargaining Reshapes Wealth Distribution, Empowers Risk-Averse Investors
In this research, two people make deals to share the risk of investments that will pay off in the future. They have different ideas about how certain the investments will be. The study examines how the uncertainty affects their agreements. It was found that there is only one best way to share the risk, and it works out well for both sides. If they wait too long to make a deal, it might not happen at all. The terms of the deal depend on how sure they are about the investments, and sometimes one person might lose out if the other person becomes more cautious. The study also found that in specific situations, the best deal is possible to reach through bargaining.