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

See all articles by Ethan A. Ligon

Ethan A. Ligon

University of California, Berkeley; Giannini Foundation

Laura Schechter

University of Wisconsin at Madison - Agricultural and Applied Economics; University of Wisconsin at Madison - Economics

Date Written: June 29, 2018

Abstract

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

Ligon, Ethan A. and Schechter, Laura, Structural Experimentation to Distinguish between Models of Risk Sharing with Frictions in Rural Paraguay (June 29, 2018). Available at SSRN: https://ssrn.com/abstract=3004846 or http://dx.doi.org/10.2139/ssrn.3004846

Ethan A. Ligon

University of California, Berkeley ( email )

207 Giannini Hall #3310
Berkeley, CA 94720-3310
United States

Giannini Foundation

UC Davis
Davis, CA 95616
United States

Laura Schechter (Contact Author)

University of Wisconsin at Madison - Agricultural and Applied Economics ( email )

427 Lorch St.
Madison, WI 53706-1503
United States

HOME PAGE: http://aae.wisc.edu/lschechter

University of Wisconsin at Madison - Economics ( email )

William H. Sewell Social Science Building
1180 Observatory Drive
Madison, WI 53706-1393
United States

HOME PAGE: http://aae.wisc.edu/lschechter

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