Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/307230 
Year of Publication: 
2024
Series/Report no.: 
IZA Discussion Papers No. 17406
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
When formal insurance is unavailable, mutual insurance among households can serve as an alternative. This paper analyzes a game between economic agents facing uncertainty and maximizing discounted utility without enforceable contracts or access to capital markets. While autarky is always a possible outcome, under high discount factors, a mutually beneficial trigger-strategy equilibrium can be achieved. Full insurance is possible with strongly negatively correlated endowments, while partial insurance is generally feasible. The analysis highlights environments wherein varying levels of insurance can emerge, with applications to real-world institutional contexts.
Subjects: 
mutual insurance
risk sharing
group formation
JEL: 
C72
C73
D80
G20
O11
Document Type: 
Working Paper

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