Rotating Savings and Credit Associations When Participants are Risk Averse
We model rotating savings and credit associations (Roscas) among risk-averse participants who experience privately observed income shocks. A random Rosca is not advantageous, whereas a bidding Rosca is if temporal risk aversion is less pronounced than static risk aversion. The payoff scheme of a bidding Rosca facilitates risk sharing in the presence of information asymmetries. The risk-sharing performance of a simple arrangement where a group of homogenous individuals runs several bidding Roscas simultaneously is as good as that of a linear risk-sharing contract, and is more enforceable because it carries a fixed rather than a variable contribution. Copyright 2003 By The Economics Department Of The University Of Pennsylvania And Osaka University Institute Of Social And Economic Research Association.
Volume (Year): 44 (2003)
Issue (Month): 3 (08)
|Contact details of provider:|| Postal: 160 McNeil Building, 3718 Locust Walk, Philadelphia, PA 19104-6297|
Phone: (215) 898-8487
Fax: (215) 573-2057
Web page: http://www.econ.upenn.edu/ier
More information through EDIRC
|Order Information:|| Web: http://www.blackwellpublishing.com/subs.asp?ref=0020-6598 Email: |
When requesting a correction, please mention this item's handle: RePEc:ier:iecrev:v:44:y:2003:i:3:p:979-1005. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing)or ()
If references are entirely missing, you can add them using this form.