The new realities of risk sharing: network effects and big data machine learning
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This article discusses one of the myths and the new realities of risk sharing. The myth is that risk sharing contracts are costly and demand more information than debt based contracts. The reality is that risk sharing contracts are incentive-compatible contract because there is an incentive structure in place to elicit truth-telling, trust, cooperation, hard work, and efficiency in resource management; factors that could not be written into contracts and enforced. Hence, the contracts attenuate coordination problem and improve the efficiency of outcomes.
Risk sharing , Technology , Network effects , Big data
Dewandaru, G., Ng, A. B. K., & Mirakhor, A. (2017). The new realities of risk sharing: network effects and big data machine learning. IF Hub, 5 (June 2017), pp. 16-21.