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Informal Insurance, Enforcement Constraints, and Group Formation

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Abstract

We propose a concept of self-enforcing risk-sharing agreement that are robust not only to single-person deviations but also to potential deviations by subgroups, requiring that the deviating subgroup itself employs some self-enforcing risk-sharing agreement. We observe that the stability of subgroups may destabilize insurance arrangements among larger groups. Using this concept of stability, we study different examples.

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  • Garance Genicot, Georgetown University and Debraj Ray, New York University and Instituto de An´alisis Econ´omico (CSIC), 2004. "Informal Insurance, Enforcement Constraints, and Group Formation," Working Papers gueconwpa~04-04-03, Georgetown University, Department of Economics.
    • Handle: RePEc:geo:guwopa:gueconwpa~04-04-03
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    Cited by:

    1. Bloch, Francis & Genicot, Garance & Ray, Debraj, 2008. "Informal insurance in social networks," Journal of Economic Theory, Elsevier, vol. 143(1), pages 36-58, November.

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    More about this item

    JEL classification:

    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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