Risk-sharing networks

Journal Article (Journal Article)

This paper considers the formation of risk-sharing networks. Following empirical findings, we build a model where pairs form links, but a population cannot coordinate links. As a benchmark, individuals commit to share monetary holdings equally with linked partners. We find efficient networks can (indirectly) connect all individuals and involve full insurance. But equilibrium networks connect fewer individuals. When breaking links, individuals do not consider negative externalities on others in the network. Thus identical individuals can end up in different positions in a network and have different outcomes. These results may help to explain empirical findings that risk-sharing is often asymmetric. © 2007.

Full Text

Duke Authors

Cited Authors

  • Bramoullé, Y; Kranton, R

Published Date

  • November 1, 2007

Published In

Volume / Issue

  • 64 / 3-4 SPEC. ISS.

Start / End Page

  • 275 - 294

International Standard Serial Number (ISSN)

  • 0167-2681

Digital Object Identifier (DOI)

  • 10.1016/j.jebo.2006.10.004

Citation Source

  • Scopus