Sharing as risk pooling in a social dilemma experiment

Abstract

ABSTRACT. In rural economies with missing or incomplete markets, idiosyncratic risk is frequently pooled through informal networks. Idiosyncratic shocks, however, are not limited to private goods but can also restrict an individual from partaking in or benefiting from a collective activity. In these situations, a group must decide whether to provide insurance to the affected member. We describe results of a laboratory experiment designed to test whether a simple sharing institution can sustain risk pooling in a social dilemma with idiosyncratic risk. We tested whether risk could be pooled without a commitment device and, separately, whether effective risk pooling induced greater cooperation in the social dilemma. We found that even in the absence of a commitment device or reputational considerations, subjects voluntarily pooled risk, thereby reducing variance in individual earnings. In spite of effective risk pooling, however, cooperation in the social dilemma was unaffected.

Intergroup cooperation prevents resource exhaustion but undermines intra-group cooperation in the common-pool resource experiment

“…Thus, donations from the outgroup were more than enough to compensate for the loss of resources because of shocks. These results are in line with the findings from Cherry et al (2015). The authors showed that individuals are willing to compensate losses to other group members in the presence of idiosyncratic risk.…”

“…My work also relates to the literature on risk pooling within groups, which I expand to the intergroup context. Recently, Cherry et al, (2015) examined whether subjects are willing to share their payoffs with other members of their group who lost some endowments because of the idiosyncratic shock. The authors report high levels of intragroup sharing, which reduce the variance of individual earnings.…”

Indirect Reciprocity, Resource Sharing, and Environmental Risk: Evidence from Field Experiments in Siberia

“…Individual cash earnings were determined by a single round that was randomly selected by a die roll at the end of the experiment [ 10 , 43 ]. Selecting a single round eliminated the possibility for participants to pool earnings over time, which would have been analogous to individually insuring against shocks.…”

“…However, cooperation often occurs in multiple domains. In addition to contributing to the public good or harvesting from a shared resource, what we refer to as the “production domain,” cooperation can also emerge in other domains, such as punishing defectors [ 3 – 6 ], rewarding cooperators [ 7 – 9 ] or sharing with those who experience a hardship [ 10 ]. These domains often interact which reflects the fact that benefits of cooperation can extend beyond a single period, domain, or state of nature [ 11 ].…”

Advancing the understanding of behavior in social-ecological systems: results from lab and field experiments

“…The groups had higher levels of collective action when risks were higher. Cherry et al (2015) studied the effect of shocks on the willingness of participants to share resources with the affected individual. The experiment was inspired by many situations in Arctic communities where individuals can lose their resource because of external events.…”