Sharing as Risk Pooling in a Social Dilemma Experiment

Todd Cherry, E. Lance Howe () and James Murphy
Additional contact information
E. Lance Howe: Department of Economics, University of Alaska Anchorage

No 2012-01, Working Papers from University of Alaska Anchorage, Department of Economics

Abstract: In rural economies with missing or incomplete markets, idiosyncratic risk is frequently pooled through informal networks. Idiosyncratic shocks, however, are not limited to private goods but can also restrict an individual from partaking in or benefitting from a collective activity. In these situations, a group must decide whether to provide insurance to the affected member. In this paper, we describe results of a laboratory experiment designed to test whether a simple sharing institution can sustain risk pooling in a social dilemma with idiosyncratic risk. We test whether risk can be pooled without a commitment device and, separately, whether effective risk pooling induces greater cooperation in the social dilemma. We find that even in the absence of a commitment device or reputational considerations, subjects voluntarily pool risk thereby reducing variance in individual earnings. In spite of effective risk pooling, however, cooperation in the social dilemma is unaffected.

Keywords: lab experiment; public goods; risk; shock; sharing; experimental economics; environmental economics (search for similar items in EconPapers)
JEL-codes: C90 C92 D70 D81 H41 O13 Q20 (search for similar items in EconPapers)
Date: 2012-04
New Economics Papers: this item is included in nep-cbe, nep-evo, nep-exp and nep-hpe
References: View references in EconPapers View complete reference list from CitEc
Citations:

Published in Ecology and Society. 20(1):68

Downloads: (external link)
http://www.econpapers.uaa.alaska.edu/RePEC/ala/wpaper/ALA201201.pdf (application/pdf)

Related works:
Working Paper: Sharing as Risk Pooling in a Social Dilemma Experiment (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ala:wpaper:2012-01

Access Statistics for this paper

More papers in Working Papers from University of Alaska Anchorage, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Jonathan Alevy ().