An Experimental Analysis ofGroup Size and Risk Sharing
AbstractWe study the relationship between group size and the extent of risk sharing in an insurance game played over a number of periods with random idiosyncratic and aggregate shocks to income in each period. Risk sharing is attained via agents that receive a high endowment in one period making unilateral transfers to agents that receive a low endowment in that period. The complete risk sharing allocation is for all agents to place their endowments in a common pool, which is then shared equally among members of the group in every period. Theoretically, the larger the group size, the smaller the per capita dispersion in consumption and greater is the potential value of insurance. Field evidence however suggests that smaller groups do better than larger groups as far as risk sharing is concerned. Results from our experiments show that the extent of mutual insurance is significantly higher in smaller groups, though contributions to the pool are never close to what complete risk sharing requires.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. 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.
Bibliographic InfoPaper provided by The University of Melbourne in its series Department of Economics - Working Papers Series with number 955.
Length: 43 pages
Date of creation: 2005
Date of revision:
Contact details of provider:
Postal: Department of Economics, The University of Melbourne, 5th Floor, Economics and Commerce Building, Victoria, 3010, Australia
Phone: +61 3 8344 5289
Fax: +61 3 8344 6899
Web page: http://www.economics.unimelb.edu.au
More information through EDIRC
Reciprocity; Risk Sharing; Group Size; Experiments;
Other versions of this item:
- Ananish Chaudhuri & Lata Gangadharan & Pushkar Maitra, 2006. "An Experimental Analysis of Group Size and Risk Sharing," Monash Economics Working Papers 02/06, Monash University, Department of Economics.
- O12 - Economic Development, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
- C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-03-18 (All new papers)
- NEP-DEV-2006-03-18 (Development)
- NEP-EXP-2006-03-18 (Experimental Economics)
- NEP-FMK-2006-03-18 (Financial Markets)
- NEP-IAS-2006-03-18 (Insurance Economics)
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.:
- Charles Noussair & Steven Tucker, 2005.
"Combining Monetary and Social Sanctions to Promote Cooperation,"
Western Economic Association International, vol. 43(3), pages 649-660, July.
- Noussair, C.N. & Tucker, S., 2005. "Combining monetary and social sanctions to promote cooperation," Open Access publications from Tilburg University urn:nbn:nl:ui:12-377935, Tilburg University.
- Gary Charness, University of California, Santa Barbara and Garance Genicot,Georgetown University, 2004.
"An Experimental Test of Risk-Sharing Arrangements,"
gueconwpa~04-04-02, Georgetown University, Department of Economics.
- Murgai, Rinku & Winters, Paul & Sadoulet, Elisabeth & Janvry, Alain de, 2002.
"Localized and incomplete mutual insurance,"
Journal of Development Economics,
Elsevier, vol. 67(2), pages 245-274, April.
- Garance Genicot & Debraj Ray, 2003.
"Group Formation in Risk-Sharing Arrangements,"
Review of Economic Studies,
Oxford University Press, vol. 70(1), pages 87-113.
- Abigail Barr, 2003.
"Risk Pooling, Commitment, and Information: An experimental test of two fundamental assumptions,"
Economics Series Working Papers
WPS/2003-05, University of Oxford, Department of Economics.
- Abigail Barr, 2003. "Risk pooling, commitment and information: An experimental test of two fundamental assumptions," Framed Field Experiments 00124, The Field Experiments Website.
- Abigail Barr, 2003. "Risk Pooling, Commitment and Information: An experimental test of two fundamental assumptions," Working Papers 2082, The Field Experiments Website.
- Abigail Barr, 2004. "Risk Pooling, Commitment, and Information: An experimental test of two fundamental assumptions," Development and Comp Systems 0409030, EconWPA.
- Buckley, Edward & Croson, Rachel, 2006. "Income and wealth heterogeneity in the voluntary provision of linear public goods," Journal of Public Economics, Elsevier, vol. 90(4-5), pages 935-955, May.
- Van Huyck, John B & Battalio, Raymond C & Beil, Richard O, 1990.
"Tacit Coordination Games, Strategic Uncertainty, and Coordination Failure,"
American Economic Review,
American Economic Association, vol. 80(1), pages 234-48, March.
- John B Van Huyck & Raymond C Battalio & Richard O Beil, 1997. "Tacit coordination games, strategic uncertainty, and coordination failure," Levine's Working Paper Archive 1225, David K. Levine.
- J. B. Van Huyck & R. C. Battalio & R. O. Beil, 2010. "Tacit coordination games, strategic uncertainty, and coordination failure," Levine's Working Paper Archive 661465000000000393, David K. Levine.
- Becker, Gary S, 1974.
"A Theory of Social Interactions,"
Journal of Political Economy,
University of Chicago Press, vol. 82(6), pages 1063-93, Nov.-Dec..
- Arellano, Manuel & Bond, Stephen, 1991.
"Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations,"
Review of Economic Studies,
Wiley Blackwell, vol. 58(2), pages 277-97, April.
- Tom Doan, . "RATS program to replicate Arellano-Bond 1991 dynamic panel," Statistical Software Components RTZ00169, Boston College Department of Economics.
- Marcel Fafchamps & Susan Lund, 2000.
"Risk-Sharing Networks in Rural Philippines,"
Economics Series Working Papers
10, University of Oxford, Department of Economics.
- Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, vol. 10(2), pages 171-178, June.
- Charness, Gary & Rigotti, Luca & Rustichini, Aldo, 2003. "They are watching you: Social facilitation in institutions," University of California at Santa Barbara, Economics Working Paper Series qt37k9n337, Department of Economics, UC Santa Barbara.
- Selten, Reinhard & Ockenfels, Axel, 1998. "An experimental solidarity game," Journal of Economic Behavior & Organization, Elsevier, vol. 34(4), pages 517-539, March.
- R. M. Isaac & J. M. Walker, 2010.
"Group size effects in public goods provision: The voluntary contribution mechanism,"
Levine's Working Paper Archive
310, David K. Levine.
- Isaac, R Mark & Walker, James M, 1988. "Group Size Effects in Public Goods Provision: The Voluntary Contributions Mechanism," The Quarterly Journal of Economics, MIT Press, vol. 103(1), pages 179-99, February.
- Van Huyck, John B. & Gillette, Ann B. & Battalio, Raymond C., 1992. "Credible assignments in coordination games," Games and Economic Behavior, Elsevier, vol. 4(4), pages 606-626, October.
- Ernst Fehr & Klaus M. Schmidt, 1999.
"A Theory Of Fairness, Competition, And Cooperation,"
The Quarterly Journal of Economics,
MIT Press, vol. 114(3), pages 817-868, August.
- Ernst Fehr & Klaus M. Schmidt, . "A Theory of Fairness, Competition and Cooperation," IEW - Working Papers 004, Institute for Empirical Research in Economics - University of Zurich.
- Fehr, Ernst & Schmidt, Klaus M., 1998. "A Theory of Fairness, Competition and Cooperation," CEPR Discussion Papers 1812, C.E.P.R. Discussion Papers.
- John Bone & John Hey & John Suckling, .
"A Simple Risk-Sharing Experiment,"
00/36, Department of Economics, University of York.
- Grimard, Franque, 1997. "Household consumption smoothing through ethnic ties: evidence from Cote d'Ivoire," Journal of Development Economics, Elsevier, vol. 53(2), pages 391-422, August.
- Charles A. Holt & Susan K. Laury, 2002. "Risk Aversion and Incentive Effects," American Economic Review, American Economic Association, vol. 92(5), pages 1644-1655, December.
- Isaac, R. Mark & Walker, James M. & Williams, Arlington W., 1994. "Group size and the voluntary provision of public goods : Experimental evidence utilizing large groups," Journal of Public Economics, Elsevier, vol. 54(1), pages 1-36, May.
- Brown, Paul M. & Stewart, Steven, 1999. "Avoiding severe environmental consequences: evidence on the role of loss avoidance and risk attitudes," Journal of Economic Behavior & Organization, Elsevier, vol. 38(2), pages 179-198, February.
- Axel Ockenfels & Gary E. Bolton, 2000. "ERC: A Theory of Equity, Reciprocity, and Competition," American Economic Review, American Economic Association, vol. 90(1), pages 166-193, March.
- Potters J.A.M. & Tausch F. & Riedl A.M., 2013.
"An experimental investigation of risk sharing and adverse selection,"
015, Maastricht : GSBE, Graduate School of Business and Economics.
- Franziska Tausch & Jan Potters & Arno Riedl, 2013. "An Experimental Investigation of Risk Sharing and Adverse Selection," CESifo Working Paper Series 4192, CESifo Group Munich.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Marisa Cerantola).
If references are entirely missing, you can add them using this form.