The Role of Securities in the Optimal Allocation of Risk-bearing

Abstract

The theory of the optimal allocation of resources under conditions of certainty is well-known. In the present note, an extension of the theory to conditions of subjective uncertainty is considered.

This paper was originally read at the Colloque sur les Fondements et Applications de la Théorie du Risque en Économétrie of the Centre National de la Recherche Scientifique, Paris, France, on may 13, 1952 and appeared in French in the proceedings of the colloquium, published by the Centtre National under the title, Économétrie, 1953. The research was carried out under contract Nonr-225 (50) of the U.S. umce of Naval Research at Stanford University.