IDEAS home Printed from https://ideas.repec.org/a/oup/restud/v70y2003i1p87-113.html
   My bibliography  Save this article

Group Formation in Risk-Sharing Arrangements

Author

Listed:
  • Garance Genicot
  • Debraj Ray

Abstract

We study informal insurance within communities, explicitly recognizing the possibility that subgroups of individuals may destabilize insurance arrangements among the larger group. We therefore consider self-enforcing risk-sharing agreements that are robust not only to single-person deviations but also to potential deviations by subgroups. However, such deviations must be credible, in the sense that the subgroup must pass exactly the same test that we apply to the entire group; it must itself employ some self-enforcing risk-sharing agreement. We observe that the stability of subgroups is inimical to the stability of the group as a whole. Two surprising consequences of this analysis are that stable groups have (uniformly) bounded size, a result in sharp contrast to the individual-deviation problem, and that the degree of risk-sharing in a community is generally non-monotonic in the level of uncertainty or need for insurance in the community. Copyright 2003, Wiley-Blackwell.

Suggested Citation

  • Garance Genicot & Debraj Ray, 2003. "Group Formation in Risk-Sharing Arrangements," Review of Economic Studies, Oxford University Press, vol. 70(1), pages 87-113.
  • Handle: RePEc:oup:restud:v:70:y:2003:i:1:p:87-113
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1111/1467-937X.00238
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:oup:restud:v:70:y:2003:i:1:p:87-113. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Oxford University Press (email available below). General contact details of provider: https://academic.oup.com/restud .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.