Bloch, Francis, Genicot, Garance and Ray, Debraj (2008) Informal insurance in social networks. Journal of Economic Theory, Volume 143 (Number 1). pp. 36-58. doi:10.1016/j.jet.2008.01.008

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Abstract

This paper studies bilateral insurance schemes across networks of individuals. While transfers are based on social norms, individuals must have the incentive to comply. We investigate the structure of self-enforcing insurance networks. Network links play two distinct and possibly conflictual roles. They act as conduits for both transfers and information; affecting the scope for insurance and the severity of punishments upon noncompliance. Their interaction leads to a characterization of stable networks as suitably "sparse" networks. Thickly and thinly connected networks tend to be stable, whereas intermediate degrees of connectedness jeopardize stability. Finally. we discuss the effect of discounting on stability. (C) 2008 Elsevier Inc. All rights reserved.

Item Type:	Journal Article
Subjects:	H Social Sciences > HC Economic History and Conditions H Social Sciences > HM Sociology
Divisions:	Faculty of Social Sciences > Economics
Library of Congress Subject Headings (LCSH):	Social networks, Risk management, Economic assistance, Domestic, Microinsurance, Insurance
Journal or Publication Title:	Journal of Economic Theory
Publisher:	Academic Press
ISSN:	0022-0531
Official Date:	November 2008
Dates:	Date Event November 2008 Published
Volume:	Volume 143
Number:	Number 1
Number of Pages:	23
Page Range:	pp. 36-58
DOI:	10.1016/j.jet.2008.01.008
Status:	Peer Reviewed
Publication Status:	Published
Access rights to Published version:	Restricted or Subscription Access
Funder:	National Science Foundation (U.S.) (NSF)
Grant number:	0241070 (NSF)

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