We construct an overlapping generations model with unemployment risk where wages, employment and severance payments are set through efficient bargaining between risk averse Unions and risk neutral firms. Assuming that a First Best cannot be achieved due to workers' shirking incentives, we...

According to a revised definition of Samuelson, a risk-averse agent is called a coward whenever he refuse even a small portion of a risky gamble exhibiting a positive expected payoff. This property may cause the invalidation of some of the basic theorems of the insurance and finance theory. As...

I analyze an overlapping generations model with old age productivity risk where wages, employment and severance payments are set through efficient bargaining between risk averse unions and risk neutral firms. Equilibrium allocations with limited union membership are second-best inefficient as...