Voluntary Contributions to a Mutual Insurance Pool

Louis Lévy-Garboua, Claude Montmarquette, Jonathan Vaksmann () and Marie Claire Villeval
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Jonathan Vaksmann: GAINS - Groupe d'Analyse des Itinéraires et des Niveaux Salariaux - UM - Le Mans Université

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Abstract: We study mutual-aid games in which individuals choose to contribute to an informal mutual insurance pool. Individual coverage is determined by the aggregate level of contributions and a sharing rule. We analyze theoretically and experimentally the (ex ante) efficiency of equal and contribution-based coverage. The equal coverage mechanism leads to a unique no-insurance equilibrium while contribution-based coverage develops multiple equilibria and improves efficiency. Experimentally, the latter treatment reduces the amount of transfers from high contributors to low contributors and generates a \dual interior equilibrium". That dual equilibrium is consistent with the co-existence of different prior norms which correspond to notable equilibria derived in the theory. This results in asymmetric outcomes with a majority of high contributors less than fully reimbursing the global losses and a significant minority of low contributors less than fully defecting. Such behavioral heterogeneity may be attributed to risk attitudes (risk tolerance vs risk aversion) which is natural in a risky context.

Keywords: mutual-aid; games (search for similar items in EconPapers)
Date: 2017-02
Note: View the original document on HAL open archive server: https://hal.science/hal-01476440v1
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Published in Journal of Public Economic Theory, 2017, 19 (1), pp.198-218. ⟨10.1111/jpet.12181⟩

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Related works:
Journal Article: Voluntary Contributions to a Mutual Insurance Pool (2017)
Working Paper: Voluntary Contributions to a Mutual Insurance Pool (2017)
Working Paper: Voluntary Contributions to a Mutual Insurance Pool (2017)
Working Paper: Voluntary Contributions to a Mutual Insurance Pool (2015)
Working Paper: Voluntary Contributions to a Mutual Insurance Pool (2015)
Working Paper: Voluntary Contributions to a Mutual Insurance Pool (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:pseptp:hal-01476440

DOI: 10.1111/jpet.12181

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