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    Choosing a gambling partner: testing a model of mutual insurance in the lab

    Di Cagno, D. and Sciubba, Emanuela and Spallone, M. (2012) Choosing a gambling partner: testing a model of mutual insurance in the lab. Theory and Decision 72 (4), pp. 537-571. ISSN 0040-5833.

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    In this paper we investigate how economic agents choose gambling part- ners and how paired risky choices di§er from individual ones. To this aim we develop a simple model and design a laboratory experiment that allows us to compare individual versus paired decisions across two treatments where pairs are respectively exogenously and endogenously formed. In both treat- ments paired subjects decide individually and indipendently how to allocate their wealth over a portfolio of lotteries and fully commit to share any win- nings. The main result from our experiment is that whenever agents are allowed to choose a gambling partner they decide to team up with other agents who display the same degree of risk aversion as themselves. More- over paired choices consistentlty involve higher risk taking than individual choices. This Önding is more evident when information on subjectsírisk at- titudes is made available and when subjects team up in homogeneous pairs, thereby conÖrming that subjects successfully exploit the beneÖts of mutual insurance.


    Item Type: Article
    Keyword(s) / Subject(s): risk-taking, mutual insurance, matching, homophily, experiments
    School: Birkbeck Faculties and Schools > Faculty of Business and Law > Birkbeck Business School
    Depositing User: Emanuela Sciubba
    Date Deposited: 03 Jun 2013 10:10
    Last Modified: 02 Aug 2023 17:04


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