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Risk Sharing, Commitment and Information: An experimental analysis

  • Abigail Barr
  • Garance Genicot

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.

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File URL: http://www.csae.ox.ac.uk/workingpapers/pdfs/2007-17text.pdf
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Paper provided by Centre for the Study of African Economies, University of Oxford in its series CSAE Working Paper Series with number 2007-17.

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Date of creation: 2007
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Handle: RePEc:csa:wpaper:2007-17
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  1. 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.
  2. Garance Genicot & Gary Charness, 2004. "An Experimental Test of Risk-Sharing Arrangements," 2004 Meeting Papers 807, Society for Economic Dynamics.
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