EconPapers    
Economics at your fingertips  
 

La Crema: A Case Study of Mutual Fire Insurance

Antonio Cabreales, Antoni Calvó-Armengol and Matthew Jackson ()
Authors registered in the RePEc Author Service: Antonio Cabrales ()

Journal of Political Economy, 2003, vol. 111, issue 2, 425-458

Abstract: We analyze a mutual fire insurance mechanism used in Andorra, which is called La Crema in the local language. This mechanism relies on households' announced property values to determine how much a household is reimbursed in the case of a fire and how payments are apportioned among other households. The only Pareto-efficient allocation reachable through the mechanism requires that all households honestly report the true value of their property. However, such honest reporting is not an equilibrium except in the extreme case in which the property values are identical for all households. Nevertheless, as the size of the society becomes large, the benefits from deviating from truthful reporting vanish, and all the nondegenerate equilibria of the mechanism are nearly truthful and approximately Pareto efficient.

Date: 2003
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7) Track citations by RSS feed

Downloads: (external link)
http://dx.doi.org/10.1086/367680 main text (application/pdf)
Access to the online full text or PDF requires a subscription.

Related works:
Working Paper: La Crema: A case study of mutual fire insurance (2000) Downloads
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:ucp:jpolec:v:111:y:2003:i:2:p:425-458

Access Statistics for this article

More articles in Journal of Political Economy from University of Chicago Press
Bibliographic data for series maintained by Journals Division ().

 
Page updated 2020-02-19
Handle: RePEc:ucp:jpolec:v:111:y:2003:i:2:p:425-458