Voluntary Contributions to a Mutual Insurance Pool

Article dans une revue: We study mutual-aid games in which individuals choose to contribute to an informal mutual insurance pool. Individual coverage is determined by the aggregate level of contributions and a sharing rule. We analyze theoretically and experimentally the (ex ante) efficiency of equal and contribution-based coverage. The equal coverage mechanism leads to a unique no-insurance equilibrium while contribution-based coverage develops multiple equilibria and improves efficiency. Experimentally, the latter treatment reduces the amount of transfers from high contributors to low contributors and generates a dual interior equilibrium". That dual equilibrium is consistent with the co-existence of different prior norms which correspond to notable equilibria derived in the theory. This results in asymmetric outcomes with a majority of high contributors less than fully reimbursing the global losses and a significant minority of low contributors less than fully defecting. Such behavioral heterogeneity may be attributed to risk attitudes (risk tolerance vs risk aversion) which is natural in a risky context.

Auteur(s)

Louis Lévy-Garboua, Claude Montmarquette, Jonathan Vaksmann, Marie-Claire Villeval

Revue
  • Journal of Public Economic Theory
Date de publication
  • 2017
Mots-clés JEL
C72 C91 H21 H41 I18
Mots-clés
  • Mutual-aid games
Pages
  • 198-218
Version
  • 1
Volume
  • 19