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A Simple Risk-Sharing Experiment

Author

Listed:
  • John Bone
  • John Hey
  • John Suckling

Abstract

This paper reports on an experiment designed to test whether pairs of individuals are able to exploit efficiency gains in the sharing of a risky financial prospect. Observations from a previous experiment had suggested a general rejection of efficiency in favour of ex post equality. The present experiment explores some possible explanations for this. The results indicate that fairness is not a significant consideration, but rather that having to choose between prospects diverts partners from allocating the chosen prospect efficiently.

Suggested Citation

  • John Bone & John Hey & John Suckling, "undated". "A Simple Risk-Sharing Experiment," Discussion Papers 00/36, Department of Economics, University of York.
    • Handle: RePEc:yor:yorken:00/36
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    File URL: https://www.york.ac.uk/media/economics/documents/discussionpapers/2000/0036.pdf
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    References listed on IDEAS

    as
    1. Loomes, Graham, 1998. "Probabilities vs Money: A Test of Some Fundamental Assumptions about Rational Decision Making," Economic Journal, Royal Economic Society, vol. 108(447), pages 477-489, March.
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    3. Bone, John & Hey, John & Suckling, John, 1999. "Are Groups More (or Less) Consistent Than Individuals?," Journal of Risk and Uncertainty, Springer, vol. 18(1), pages 63-81, April.
    4. Bone, John, 1998. "Risk-sharing CARA individuals are collectively EU," Economics Letters, Elsevier, vol. 58(3), pages 311-317, March.
    5. Muthoo,Abhinay, 1999. "Bargaining Theory with Applications," Cambridge Books, Cambridge University Press, number 9780521576475, November.
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    Cited by:

    1. Rud, Olga A. & Rabanal, Jean Paul & Sharifova, Manizha, 2019. "An experiment on the efficiency of bilateral exchange under incomplete markets," Games and Economic Behavior, Elsevier, vol. 114(C), pages 253-267.
    2. Gary Charness, University of California, Santa Barbara and Garance Genicot,Georgetown University, 2004. "An Experimental Test of Risk-Sharing Arrangements," Working Papers gueconwpa~04-04-02, Georgetown University, Department of Economics.
    3. Morone, Andrea & Temerario, Tiziana, 2015. "Eliciting Preferences Over Risk: An Experiment," MPRA Paper 68519, University Library of Munich, Germany.
    4. David Masclet & Youenn Loheac & Laurent Denant-Boemont & Nathalie Colombier, 2004. "Group and individual risk preferences: a lottery-choice experiment," Cahiers de la Maison des Sciences Economiques bla06063, Université Panthéon-Sorbonne (Paris 1), revised Sep 2006.
    5. Ruth Hill & Angelino Viceisza, 2012. "A field experiment on the impact of weather shocks and insurance on risky investment," Experimental Economics, Springer;Economic Science Association, vol. 15(2), pages 341-371, June.
    6. Hill, Ruth Vargas & Viceisza, Angelino, 2010. "An experiment on the impact of weather shocks and insurance on risky investment," IFPRI discussion papers 974, International Food Policy Research Institute (IFPRI).
    7. Masclet, David & Colombier, Nathalie & Denant-Boemont, Laurent & Lohéac, Youenn, 2009. "Group and individual risk preferences: A lottery-choice experiment with self-employed and salaried workers," Journal of Economic Behavior & Organization, Elsevier, vol. 70(3), pages 470-484, June.
    8. Alexandros Karakostas & Axel Sonntag & Daniel John Zizzo, 2013. "Efficiency and Fairness in Revenue Sharing Contracts," Working Paper series, University of East Anglia, Centre for Behavioural and Experimental Social Science (CBESS) 13-03, School of Economics, University of East Anglia, Norwich, UK..
    9. M. I. Lau & T. Neugebauer & U. Schmidt, 2014. "Preface," Theory and Decision, Springer, vol. 77(3), pages 287-290, October.
    10. Gary Charness & Garance Genicot, 2009. "Informal Risk Sharing in an Infinite‐Horizon Experiment," Economic Journal, Royal Economic Society, vol. 119(537), pages 796-825, April.
    11. Sutter, Matthias, 2005. "Are four heads better than two? An experimental beauty-contest game with teams of different size," Economics Letters, Elsevier, vol. 88(1), pages 41-46, July.
    12. Carina Cavalcanti & Andreas Leibbrandt, 2024. "Do Positive Externalities Affect Risk Taking? Experimental Evidence on Gender and Group Membership," Monash Economics Working Papers 2024-05, Monash University, Department of Economics.
    13. A. Chaudhuri & L. Gangadharan & Pushkar Maitra, 2005. "An Experimental Analysis ofGroup Size and Risk Sharing," Department of Economics - Working Papers Series 955, The University of Melbourne.
    14. Glenn W. Harrison & Jia Min Ng, 2019. "Behavioral insurance and economic theory: A literature review," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 22(2), pages 133-182, July.
    15. Hubert Gabrisch, 2023. "In The Maelstrom Of Crises: The European Union And The ‘Zeitenwende’," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 68(236), pages 7-27, January –.
    16. Nadja Trhal & Ralf Radermacher, 2006. "Bad luck vs. self-inflicted neediness – An experimental investigation of gift giving in a solidarity game," Working Paper Series in Economics 28, University of Cologne, Department of Economics, revised 07 Mar 2008.
    17. Fredrik Carlsson & Peter Martinsson & Ping Qin & Matthias Sutter, 2013. "The influence of spouses on household decision making under risk: an experiment in rural China," Experimental Economics, Springer;Economic Science Association, vol. 16(3), pages 383-401, September.
    18. Loerakker, Ben & Bault, Nadège & Hoyer, Maximilian & van Winden, Frans, 2022. "On the Development of Cooperative and Antagonistic Relationships in Public Good Environments. A Model-Based Experimental Study," OSF Preprints wur7c, Center for Open Science.
    19. Bolle, Friedel & Liepmann, Hannah & Vogel, Claudia, 2012. "How much social insurance do you want? An experimental study," Journal of Economic Psychology, Elsevier, vol. 33(6), pages 1170-1181.
    20. Pradiptyo, Rimawan & Sahadewo, Gumilang Aryo, 2012. "On The Complexity of Eliminating Fuel Subsidy in Indonesia; A Behavioral Approach," MPRA Paper 40045, University Library of Munich, Germany.
    21. Temerario, Tiziana, 2014. "Individual and Group Behaviour Toward Risk: A Short Survey," MPRA Paper 58079, University Library of Munich, Germany.

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    More about this item

    Keywords

    Risk-sharing; experiments; bargaining; fairness.;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior

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