Informal Insurance Networks

Wayne Gao and Moon Eunyoung ()
Additional contact information
Moon Eunyoung: University of Liverpool Management School, Chatham Street, Liverpool L69 7ZH, UK

The B.E. Journal of Theoretical Economics, 2016, vol. 16, issue 2, 455-484

Abstract: This paper develops a model of risk sharing in which each individual’s income shock is locally shared ex-post given an ex-ante strategically formed network. Emphasizing the informational constraint of the network such that transfers can only be contingent on local information, the model provides characterizations of the ex-ante efficient network and the pairwise stable networks. While it is no surprise that the unique efficient network is the complete graph, it is interesting that any pairwise stable network features low average degree and almost 2-regular structures, even under individual risk heterogeneity, and it tends to exhibit positive assortativity in terms of risk variances. If expected incomes are also locally shared in addition to income shocks, the pairwise stable network may become more densely connected, achieving efficiency under certain parameter values.

Keywords: network; informal insurance; risk sharing; pairwise stability (search for similar items in EconPapers)
JEL-codes: D85 O12 O17 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://doi.org/10.1515/bejte-2015-0006 (text/html)
For access to full text, subscription to the journal or payment for the individual article is required.

Related works:
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:bpj:bejtec:v:16:y:2016:i:2:p:455-484:n:5

Ordering information: This journal article can be ordered from
https://www.degruyter.com/journal/key/bejte/html

DOI: 10.1515/bejte-2015-0006

Access Statistics for this article

The B.E. Journal of Theoretical Economics is currently edited by Burkhard C. Schipper

More articles in The B.E. Journal of Theoretical Economics from De Gruyter
Bibliographic data for series maintained by Peter Golla ().