(Link to the most recent version)
Can informal risk-sharing crowd out formal insurance policies? I consider an insurance model where altruistic agents can buy insurance, self-protect against a loss and cross-insure by means of bilateral transfers. Such altruism-driven transfers may lead the agents to free-ride on each others' choices of effort and demand for formal insurance, and hence hinder the development of formal insurance markets. Absent any information asymmetries, I show that an actuarially fair insurance policy providing full coverage can be crowded out by the agents' informal risk-sharing arrangements. A similar result holds when the agents' self-protection efforts cannot be contracted upon by the insurer. These findings suggest a novel source of inefficiency in insurance markets, namely prosociality among the insurees.
Sarkisian, Roberto (2017). Team Incentives under Moral and Altruistic Preferences: Which Team to Choose?, Games, 8(3), 37. Link
Sarkisian, Roberto (2021). Optimal Incentives Schemes under Homo Moralis Preferences, Games, 12(1), 28. Link
Sarkisian, Roberto (2021). Screening Teams of Moral and Altruistic Agents, Games, 12(4), 77. Link
Sarkisian, R. & T. Yamashita (2024). Optimal Student Allocation with Peer Effects, Review of Economic Design, Link
Costly Information Acquisition in a Multi-task Multi-objective Environment, with Klênio Barbosa and Braz Camargo. (Link)
Information Disclosure in Matching Markets, with Fuhito Kojima and Takuro Yamashita.
Optimal Information Disclosure Rules in Matching Markets with Peer Effects, with Fuhito Kojima and Takuro Yamashita.
Large Mechanism Design with Moment-Based Allocation Externality, with Takuro Yamashita.