Mutual Insurance Networks in Communities

GATE - Groupe d’Analyse et de Théorie Économique Lyon - St Étienne Working Paper No. 1234

32 Pages Posted: 10 Jan 2013

See all articles by Pascal Billand

Pascal Billand

Jean Monnet University

Christophe Bravard

Jean Monnet University, Saint-Etienne - CREUSET

Sudipta Sarangi

Virginia Polytechnic Institute & State University

Date Written: December 1, 2012

Abstract

We study the formation of mutual insurance networks in a model where every agent who obtains more resources gives a fixed amount of resources to all agents who have obtained less resources. The low resource agent must be directly linked to the high resource agent to receive this transfer. We identify the pairwise stable networks and efficient networks. Then, we extend our model to situations where agents differ in their generosity with regard to the transfer scheme. We show that there exist conditions under which in a pairwise stable network agents who provide the same level of transfers are linked together, while there are no links between agents who provide high transfers and agents who provide low transfers.

Keywords: Mutual insurance networks, Pairwise stable networks, Efficient networks

JEL Classification: C72, D81, D8

Suggested Citation

Billand, Pascal and Bravard, Christophe and Sarangi, Sudipta, Mutual Insurance Networks in Communities (December 1, 2012). GATE - Groupe d’Analyse et de Théorie Économique Lyon - St Étienne Working Paper No. 1234, Available at SSRN: https://ssrn.com/abstract=2197753 or http://dx.doi.org/10.2139/ssrn.2197753

Pascal Billand (Contact Author)

Jean Monnet University ( email )

34, rue Francis Baulier
Saint-Etienne, 42023
France

Christophe Bravard

Jean Monnet University, Saint-Etienne - CREUSET ( email )

34, rue Francis Baulier
Saint-Etienne, 42023
France

Sudipta Sarangi

Virginia Polytechnic Institute & State University ( email )

250 Drillfield Drive
Blacksburg, VA 24061
United States

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