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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 University of Oxford, Department of Economics in its series Economics Series Working Papers with number WPS/2007-17.

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Date of creation: 01 Aug 2007
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Handle: RePEc:oxf:wpaper:wps/2007-17
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  1. Dean Karlan, 2004. "Using experimental economics to measure social capital and predict financial decisions," Artefactual Field Experiments 00074, The Field Experiments Website.
  2. Sutter, Matthias & Haigner, Stefan & Kocher, Martin G., 2010. "Choosing the Carrot or the Stick? Endogenous Institutional Choice in Social Dilemma Situations," Munich Reprints in Economics 18193, University of Munich, Department of Economics.
  3. Garance Genicot & Debraj Ray, 2003. "Group Formation in Risk-Sharing Arrangements," Review of Economic Studies, Oxford University Press, vol. 70(1), pages 87-113.
  4. Jeffrey Carpenter & Erika Seki, 2005. "Do Social PreferencesIncrease Productivity? Field experimental evidence from fishermen in Toyoma Bay," Middlebury College Working Paper Series 0515, Middlebury College, Department of Economics.
  5. Matthew Rabin, 2001. "Risk Aversion and Expected-Utility Theory: A Calibration Theorem," Method and Hist of Econ Thought 0012001, EconWPA.
  6. Holzmann, Robert & Packard, Truman & Cuesta, Jose, 2000. "Extending coverage in multi-pillar pension systems : constraints and hypotheses, preliminary evidence and future research agenda," Social Protection Discussion Papers 21303, The World Bank.
  7. 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.
  8. Marcel Fafchamps & Susan Lund, 2000. "Risk-Sharing Networks in Rural Philippines," Economics Series Working Papers 10, University of Oxford, Department of Economics.
  9. Rege, Mari & Telle, Kjetil, 2004. "The impact of social approval and framing on cooperation in public good situations," Journal of Public Economics, Elsevier, vol. 88(7-8), pages 1625-1644, July.
  10. 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.
  11. Udry, Christopher, 1994. "Risk and Insurance in a Rural Credit Market: An Empirical Investigation in Northern Nigeria," Review of Economic Studies, Wiley Blackwell, vol. 61(3), pages 495-526, July.
  12. David Masclet & Charles Noussair & Steven Tucker & Marie-Claire Villeval, 2001. "Monetary and Non-Monetary Punishment in the Voluntary Contributions Mechanism," Post-Print halshs-00151423, HAL.
  13. Laibson, David, 1997. "Golden Eggs and Hyperbolic Discounting," The Quarterly Journal of Economics, MIT Press, vol. 112(2), pages 443-77, May.
  14. Dean S. Karlan, 2005. "Using Experimental Economics to Measure Social Capital And Predict Financial Decisions," Working Papers 909, Economic Growth Center, Yale University.
  15. Hans Binswanger, 1980. "Attitudes toward risk: Experimental measurement in rural india," Artefactual Field Experiments 00009, The Field Experiments Website.
  16. Rosenzweig, Mark R. & Stark, Oded, 1987. "Consumption Smoothing, Migration and Marriage: Evidence from Rural India," Bulletins 7515, University of Minnesota, Economic Development Center.
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