Voting over informal risk-sharing rules
People vote over risk-sharing rules to cope with random revenues. Risk-sharing rules are enforced through peer pressure : those who comply exert a negative externality on those who do not. People are differently affected by this externality. The author determines the elected risk-sharing rules and the level of compliance. It turns out that full risk-sharing is achieved only if everybody complies. Partial risk-sharing is more often achieved with, sometime, some level of non-compliance. In many cases, a majority of people votes over and complies with the risk-sharing rule that maximizes their own expected payoff.
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- George A. Akerlof, 1978.
"A theory of social custom, of which unemployment may be one consequence,"
Special Studies Papers
118, Board of Governors of the Federal Reserve System (U.S.).
- Akerlof, George A, 1980. "A Theory of Social Custom, of Which Unemployment May be One Consequence," The Quarterly Journal of Economics, MIT Press, vol. 94(4), pages 749-75, June.
- Abigail Barr, 2001. "Social dilemmas and shame-based sanctions: experimental results from rural Zimbabwe," CSAE Working Paper Series 2001-11, Centre for the Study of African Economies, University of Oxford.
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