  The paper studies an oligopolistic equilibrium model of financial agents who
aim to share their random endowments. The risk-sharing securities and their
prices are endogenously determined as the outcome of a strategic game played
among all the participating agents. In the complete-market setting, each
agent's set of strategic choices consists of the security payoffs and the
pricing kernel that are consistent with the optimal-sharing rules; while in the
incomplete setting, agents respond via demand functions on a vector of given
tradeable securities. It is shown that at the (Nash) risk-sharing equilibrium,
the sharing securities are suboptimal, since agents submit for sharing
different risk exposures than their true endowments. On the other hand, the
Nash equilibrium prices stay unaffected by the game only in the special case of
agents with the same risk aversion. In addition, agents with sufficiently lower
risk aversion act as predatory traders, since they absorb utility surplus from
the high risk averse agents and reduce the efficiency of sharing. The main
results of the paper also hold under the generalized models that allow the
presence of noise traders and heterogeneity in agents' beliefs.
