Risk taking and sharing when risk exposure is interdependent

Abigail Barr, Trudy Owens and Ashira Perera

Journal of Economic Behavior & Organization, 2020, vol. 176, issue C, 445-460

Abstract: Using a specially designed experiment, we investigate whether and how interdependence in risk exposure, i.e., risk taking by some members of a potential risk sharing group affecting not only their own but also their co-members' risk exposure, affects both risk taking and ex post sharing. The experimental subjects were Sri Lankan small-holders who face interdependent risk and share when neighbors fall on hard times in everyday life. We find that the Sri Lankan farmers reward socially responsible risk taking and, under some circumstances, punish socially irresponsible risk taking. Their behavior is consistent with socially responsible risk taking being cost-dependent, although, here, the statistical evidence is inconclusive. Finally, social responsibility in risk taking and ex post sharing do not appear to be substitutes, rather, they appear to be co-determined.

Keywords: Behavioural experiment; Risk-sharing; Solidarity (search for similar items in EconPapers)
JEL-codes: C93 D81 O12 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (1)

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Working Paper: Risk taking and sharing when risk exposure is interdependent (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:176:y:2020:i:c:p:445-460

DOI: 10.1016/j.jebo.2020.04.011

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