Altruism, Matching, and Nonmarket Insurance

ECONOMIC INQUIRY

Posted: 29 Apr 1998

See all articles by Ralph Chami

Ralph Chami

International Monetary Fund (IMF)

Jeffrey H. Fischer

U.S. Federal Trade Commission (FTC)

Abstract

Incomplete market insurance gives rise to nonmarket coinsurance arrangements. We find that the effort altruistically-linked individuals take to avoid an accident increases with the degree of altruism. If the degree of altruism is sufficiently high, an economy with nonmarket insurance yields higher social welfare than an economy without nonmarket insurance. As altruism increases, the equilibrium level of effort approaches the second-best solution without the need for costly monitoring. Coinsurance is above (below) the socially optimal level if individuals place greater weight (less weight) on their own utility than on that of their partners.

JEL Classification: D82, D1, D62, G22

Suggested Citation

Chami, Ralph and Fischer, Jeffrey H., Altruism, Matching, and Nonmarket Insurance. ECONOMIC INQUIRY, Available at SSRN: https://ssrn.com/abstract=3232

Ralph Chami (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States
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Jeffrey H. Fischer

U.S. Federal Trade Commission (FTC) ( email )

600 Pennsylvania Ave., NW
Washington, DC 20580
United States
202-326-2656 (Phone)
202-326-2625 (Fax)

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