Social capital: A double-edged sword

Arbeitspapier

We analyze efficient risk-sharing arrangements when coalitions may deviate. Coalitions form to insure against idiosyncratic income risk. Self-enforcing contracts for both the original coalition and any deviating coalition rely on a belief in future cooperation which we term \social capital". We treat the contracting conditions of original and deviating coalitions symmetrically and show that higher social capital tightens incentive constraints since it facilitates both the formation of the original as well as a deviating coalition. As a consequence, although social capital facilitates the initial formation of coalitions, the extent of risk sharing in successfully formed coalitions is declining in the extent of social capital and equilibrium allocations might feature resource burning or utility burning: social capital is indeed a double-edged sword.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: ECONtribute Discussion Paper ; No. 064

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Macroeconomics: Consumption; Saving; Wealth ; Insurance; Insurance Companies; Actuarial Studies ; Consumer Economics: Theory ; Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making‡
• Thema: Financial Coalition ; Limited Enforcement ; Risk Sharing ; Coalition-Proof Equilibrium

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Cole, Harold L. ; Krueger, Dirk ; Mailath, George J. ; Park, Yena
• Ereignis: Veröffentlichung
• (wer): University of Bonn and University of Cologne, Reinhard Selten Institute (RSI)
• (wo): Bonn and Cologne
• (wann): 2021

Weitere Informationen

• Handle: http://hdl.handle.net/10419/231489
• Letzte Aktualisierung: 10.03.2025, 11:44 MEZ