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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. Rosenzweig, Mark R & Stark, Oded, 1989. "Consumption Smoothing, Migration, and Marriage: Evidence from Rural India," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 905-26, August.
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  3. 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.
  4. Laibson, David, 1997. "Golden Eggs and Hyperbolic Discounting," The Quarterly Journal of Economics, MIT Press, vol. 112(2), pages 443-77, May.
  5. Matthias Sutter & Stefan Haigner & Martin Kocher, . "Choosing the carrot or the stick? ? Endogenous institutional choice in social dilemma situations," Working Papers 2008-07, Faculty of Economics and Statistics, University of Innsbruck.
  6. Carpenter, Jeffrey P. & Seki, Erika, 2005. "Do Social Preferences Increase Productivity? Field Experimental Evidence from Fishermen in Toyama Bay," IZA Discussion Papers 1697, Institute for the Study of Labor (IZA).
  7. 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.
  8. Garance Genicot & Debraj Ray, 2003. "Group Formation in Risk-Sharing Arrangements," Review of Economic Studies, Oxford University Press, vol. 70(1), pages 87-113.
  9. Dean Karlan, 2004. "Using experimental economics to measure social capital and predict financial decisions," Artefactual Field Experiments 00074, The Field Experiments Website.
  10. Hans Binswanger, 1980. "Attitudes toward risk: Experimental measurement in rural india," Artefactual Field Experiments 00009, The Field Experiments Website.
  11. 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.
  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. Marcel Fafchamps & Susan Lund, . "Risk Sharing Networks in Rural Philippines," Working Papers 97014, Stanford University, Department of Economics.
  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. 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.
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