Voting over informal risk-sharing rules

Stefan Ambec ()

Working Papers from Grenoble Applied Economics Laboratory (GAEL)

Abstract: 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.

Keywords: RISK SHARING; MUTUAL INSURANCE; ENFORCEMENT; PEER PRESSURE; POLITICAL ECONOMY (search for similar items in EconPapers)
JEL-codes: H21 O15 O17 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cdm, nep-dev, nep-ias and nep-pbe
Date: Written
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Related works:
Journal Article: Voting over Informal Risk--Sharing Rules (2008)
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Persistent link: http://EconPapers.repec.org/RePEc:gbl:wpaper:200509

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