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Risk Sharing, Commitment and Information: An experimental analysis

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  • Abigail Barr
  • Garance Genicot

Abstract

This paper describes and analyzes the results of a unique field experiment especially designed to test the effects of the level of commitment and information available to individuals when sharing risk. We find that limiting exogenously provided commitment is associated with less risk sharing, while limiting information on defections can be associated with more risk sharing. These results can be understood by distinguishing between intrinsic and extrinsic incentives, and by recognizing that social sanctions are costly to inflict or that individuals suffer from time-inconsistent preferences. Comparing the groups formed within our experiment with the real life risk sharing networks in a few villages allows us to test the external validity of our experiment and suggests that the results are salient to our understanding of risk sharing arrangements observed in developing countries.

Suggested Citation

  • Abigail Barr & Garance Genicot, 2007. "Risk Sharing, Commitment and Information: An experimental analysis," CSAE Working Paper Series 2007-17, Centre for the Study of African Economies, University of Oxford.
    • Handle: RePEc:csa:wpaper:2007-17
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    File URL: https://ora.ox.ac.uk/objects/uuid:b16f8a1a-63b1-4361-880d-403bf939bb57
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    References listed on IDEAS

    as
    1. Matthew Rabin, 2000. "Risk Aversion and Expected-Utility Theory: A Calibration Theorem," Econometrica, Econometric Society, vol. 68(5), pages 1281-1292, September.
    2. Laura Schechter, 2007. "Theft, Gift-Giving, and Trustworthiness: Honesty Is Its Own Reward in Rural Paraguay," American Economic Review, American Economic Association, vol. 97(5), pages 1560-1582, December.
    3. Gary Charness, University of California, Santa Barbara and Garance Genicot,Georgetown University, 2004. "An Experimental Test of Risk-Sharing Arrangements," Working Papers gueconwpa~04-04-02, Georgetown University, Department of Economics.
    4. Harold Alderman & Christina H. Paxson, 1994. "Do the Poor Insure? A Synthesis of the Literature on Risk and Consumption in Developing Countries," International Economic Association Series, in: Edmar L. Bacha (ed.), Economics in a Changing World, chapter 3, pages 48-78, Palgrave Macmillan.
    Full references (including those not matched with items on IDEAS)

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    1. Abigail Barr & Garance Genicot, 2008. "Risk Sharing, Commitment, and Information: An Experimental Analysis," Journal of the European Economic Association, MIT Press, vol. 6(6), pages 1151-1185, December.

    More about this item

    Keywords

    Field experiment; risk sharing; social sanctions; insurance; limited commitment; asymmetry of information;
    All these keywords.

    JEL classification:

    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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