Precarity: Modeling the Long Term Effects of Compounded Decisions on Individual Instability

Nokhiz, Pegah; Ruwanpathirana, Aravinda Kanchana; Patwari, Neal; Venkatasubramanian, Suresh

doi:10.1145/3461702.3462529

“…Participants with valuable investment opportunities might not bid as aggressively if their low wealth causes them to value cash highly. This is exacerbated when participants experience income shocks, which is often experienced by economically vulnerable individuals (Abebe, Kleinberg, and Weinberg 2020; Nokhiz et al 2021). Ethnographic work shows that altruism plays a significant role in alleviating this tension (Klonner 2008;Sedai, Vasudevan, and Pena 2021).…”

Section: Discussionmentioning

confidence: 99%

An Algorithmic Introduction to Savings Circles

Abebe¹,

Eck²,

Christian³

et al. 2022

Preprint

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Rotating savings and credit associations (roscas) are informal financial organizations common in settings where communities have reduced access to formal financial institutions. In a rosca, a fixed group of participants regularly contribute sums of money to a pot. This pot is then allocated periodically using lottery, aftermarket, or auction mechanisms. Roscas are empirically well-studied in economics. They are, however, challenging to study theoretically due to their dynamic nature. Typical economic analyses of roscas stop at coarse ordinal welfare comparisons to other credit allocation mechanisms, leaving much of roscas' ubiquity unexplained. In this work, we take an algorithmic perspective on the study of roscas. Building on techniques from the price of anarchy literature, we present worst-case welfare approximation guarantees. We further experimentally compare the welfare of outcomes as key features of the environment vary. These cardinal welfare analyses further rationalize the prevalence of roscas. We conclude by discussing several other promising avenues.

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“…Participants with valuable investment opportunities might not bid as aggressively if their low wealth causes them to value cash highly. This is exacerbated when participants experience income shocks, which are often experienced by economically vulnerable individuals (Abebe, Kleinberg, and Weinberg 2020;Nokhiz et al 2021). Ethnographic work shows that altruism plays a significant role in alleviating this tension (Klonner 2008;Sedai, Vasudevan, and Pena 2021).…”

Section: Discussionmentioning

confidence: 99%

An Algorithmic Introduction to Savings Circles

Abebe

¹

,

Eck

²

,

Christian

³

et al. 2022

AAAI

0

View full text Add to dashboard Cite

Rotating savings and credit associations (roscas) are informal financial organizations common in settings where communities have reduced access to formal financial institutions. In a rosca, a fixed group of participants regularly contribute sums of money to a pot. This pot is then allocated periodically using lottery, aftermarket, or auction mechanisms. Roscas are empirically well-studied in economics. They are, however, challenging to study theoretically due to their dynamic nature. Typical economic analyses of roscas stop at coarse ordinal welfare comparisons to other credit allocation mechanisms, leaving much of roscas' ubiquity unexplained. In this work, we take an algorithmic perspective on the study of roscas. Building on techniques from the price of anarchy literature, we present worst-case welfare approximation guarantees. We further experimentally compare the welfare of outcomes as key features of the environment vary. These cardinal welfare analyses further rationalize the prevalence of roscas. We conclude by discussing several other promising avenues.

show abstract