Insuring Risk-Averse Agents

  • Authors:
  • Greg Hines;Kate Larson

  • Affiliations:
  • Cheriton School of Computer Science, University of Waterloo, Waterloo, Canada;Cheriton School of Computer Science, University of Waterloo, Waterloo, Canada

  • Venue:
  • ADT '09 Proceedings of the 1st International Conference on Algorithmic Decision Theory
  • Year:
  • 2009

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Abstract

In this paper we explicitly model risk aversion in multiagent interactions. We propose an insurance mechanism that be can used by risk-averse agents to mitigate against risky outcomes and to improve their expected utility. Given a game, we show how to derive Pareto-optimal insurance policies, and determine whether or not the proposed insurance policy will change the underlying dynamics of the game (i.e. , the equilibrium). Experimental results indicate that our approach is both feasible and effective at reducing risk for agents.