Sharing responsibility: what they didn't teach you in kindergarten

Abstract

Purpose

The purpose of this paper is to consider the problem of allocating responsibility for risk through a simple classroom vignette that illustrates some of the difficulties encountered in more complex real‐world scenarios.

Design/methodology/approach

After considering a number of ad hoc allocation methods, this study focuses on the Shapley and Aumann‐Shapley values from cooperative game theory.

Findings

Shows that the Aumann‐Shapley value provides a useful tool for allocating risk in a real‐world insurance context, and therefore may be used to distribute capital (surplus) and premium loadings.

Originality/value

The paper offers insights into both the challenges of the risk‐allocation problem and its proposed solutions.

Citation

Powers, M.R. (2007), "Sharing responsibility: what they didn't teach you in kindergarten", Journal of Risk Finance, Vol. 8 No. 2, pp. 93-96. https://doi.org/10.1108/15265940710732305