This paper considers the formation of risk-sharing networks. Following empirical findings, we build a model where pairs form links, but a population cannot coordinate links. As a benchmark, individuals commit to share monetary holdings equally with linked partners. We find efficient networks can (indirectly) connect all individuals and involve full insurance. But equilibrium networks connect fewer individuals. When breaking links, individuals do not consider negative externalities on others in the network. Thus identical individuals can end up in different positions in a network and have different outcomes. These results may help to explain empirical findings that risk-sharing is often asymmetric.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Francis Bloch (GREQAM and Universite de la Mediterranee), Garance Genicot (Georgetown University, and Debraj Ray (New York University and Instituto de Analisis Economico (CSIC)), .
"Informal Insurance in Social Networks,"
Working Papers
gueconwpa~04-04-16, Georgetown University, Department of Economics.
[Downloadable!]
Other versions:
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)