An Experimental Test of Risk-Sharing Arrangements
نویسندگان
چکیده
We investigate risk-sharing without commitment by designing an experiment to match a simple model of voluntary insurance between two agents when aggregate income is constant. Participants are matched in pairs. Each period, they receive their income with or without a random component h that one person or the other receives; after observing own and counterpart income, each person in a pair can decide to make a transfer to the other person. It is common information that there is a given probability that all pairs will be dissolved at the end of each period, with participants re-matched. At the end of the experiment, one period is randomly drawn to count for cash payment. Participants all face the same variance in their income, but do not necessarily have the same mean income. This setting allows us to experimentally test different implications of risk-sharing without commitment. In particular, we find strong evidence of risk-sharing and reciprocal behavior, where transfers are higher with a higher continuation probability and with a higher degree of risk aversion. However, transfers are lower with inequality, in contrast with existing models of both risk-sharing and social preferences. JEL Classification Numbers: A49, C91, C92, D31, D81, O17.
منابع مشابه
Financing for Healthcare in Sub-Saharan Africa and South Asia: Risk Pooling & Risk-Sharing Arrangements; Essential Strategy for Overcoming Poverty Costs
متن کامل
Risk Sharing, Commitment and Information: An experimental analysis
This paper describes and analyzes the results of a unique field experiment especially designed to test the effects of the level of commitment and information available to individuals when sharing risk. We find that limiting exogenously provided commitment is associated with less risk sharing, while limiting information on defections can be associated with more risk sharing. These results can be...
متن کاملThe Crowding-out Effect of Formal Insurance on Informal Risk Sharing Arrangements: An Experimental Study
An important issue with promoting formal insurance in the rural areas of developing countries that has been previously ignored is the interaction between formal insurance and preexisting informal risk sharing arrangements. This paper shows in theory that formal insurance will crowd out informal transfers even when individuals do not purchase insurance, which often makes the overall welfare impa...
متن کاملAn Experimental Investigation of Risk Sharing and Adverse Selection
Does adverse selection hamper the effectiveness of voluntary risk sharing? How do differences in risk profiles affect adverse selection? We experimentally investigate individuals’ willingness to share risks with others. Across treatments we vary how risk profiles differ between individuals. We find strong evidence for adverse selection if individuals risk profiles can be ranked according to fir...
متن کاملA Novel Analysis of Risk Sharing Effects on Income Inequality in Informal Insurances
T his study aims to demonstrate that joining in risk sharing network leads to the reduction in incomes volatility. In this respect, income variance for a group of members in an informal insurance is modelled in which income variance prior to joining risk sharing network and after joining is analyzed statistically. A Monte Carlo simulation technique is used to prove the result. To extend an...
متن کاملذخیره در منابع من
با ذخیره ی این منبع در منابع من، دسترسی به آن را برای استفاده های بعدی آسان تر کنید
عنوان ژورنال:
دوره شماره
صفحات -
تاریخ انتشار 2003