Structural Experimentation to Distinguish between Models of Risk Sharing with Frictions in Rural Paraguay
48 Pages Posted: 22 Jul 2017 Last revised: 22 Jul 2018
Date Written: June 29, 2018
We conduct dictator-type games in rural Paraguay; different treatments involve manipulating players' information and choice sets. From individuals' choices in the games, we draw inferences regarding impediments to efficient risk sharing in the larger village supergame. Outcomes from the experimental games suggest that players in most villages are reacting to the kinds of incentives we would predict from a private information model with hidden investments, while in others players act in a manner consistent with the predictions of a model with limited commitment. No single one of our models can explain outcomes in all villages, but outcomes in nearly every village are consistent with one or more of our models.
Keywords: Risk Sharing, Experiments, Limited Commitment, Hidden Information
JEL Classification: C93, D85, D86, O17
Suggested Citation: Suggested Citation