In developing countries, traditional social obligations often press rich individuals to share their income. In this paper, we posit a "model of social pressure" in which people can sign binding financial agreements amongst themselves, thereby forming coalitions. These financial agreements may help them to alleviate their social obligations with respect to income sharing. In the above context, we show that there exists a stable structure of coalitions in which people form rotating savings and credit associations (roscas). We therefore provide a rationale for one of the most prevalent and puzzling financial institutions.
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Paper provided by Grenoble Applied Economics Laboratory (GAEL) in its series Working Papers with number
200301.
Find related papers by JEL classification: D14 - Microeconomics - - Household Behavior - - - Personal Finance G29 - Financial Economics - - Financial Institutions and Services - - - Other
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.:
Ted O'Donoghue & Matthew Rabin, 1999.
"Doing It Now or Later,"
American Economic Review,
American Economic Association, vol. 89(1), pages 103-124, March.
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