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Risk Sharing, Commitment, and Information: An Experimental Analysis

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Author Info
Abigail Barr
Garance Genicot
Abstract

This paper describes and analyzes the results of a unique field experiment especially designed to test the effects of the level of commitment and information available to individuals when sharing risk. We find that limiting exogenously provided commitment is associated with less risk sharing, whereas limiting information on defections can be associated with more risk sharing. These results can be understood by distinguishing between intrinsic and extrinsic incentives, and by recognizing that social sanctions are costly to inflict or that individuals suffer from time-inconsistent preferences. Comparing the groups formed within our experiment with the real life risk-sharing networks in a few villages allows us to test the external validity of our experiment and suggests that the results are salient to our understanding of risk-sharing arrangements observed in developing countries. (JEL: C93, D71, D81, O12) (c) 2008 by the European Economic Association.

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File URL: http://www.mitpressjournals.org/doi/pdfplus/10.1162/JEEA.2008.6.6.1151
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Article provided by MIT Press in its journal Journal of the European Economic Association.

Volume (Year): 6 (2008)
Issue (Month): 6 (December)
Pages: 1151-1185
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Handle: RePEc:tpr:jeurec:v:6:y:2008:i:6:p:1151-1185

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Find related papers by JEL classification:
C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
O12 - Economic Development, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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