Social Investments , Informal Risk Sharing , and Inequality

@inproceedings{Ambrus2014SocialI,
  title={Social Investments , Informal Risk Sharing , and Inequality},
  author={Attila Ambrus and Arun Chandrasekhar},
  year={2014}
}
This paper studies costly network formation in the context of risk sharing. Neighboring agents negotiate agreements as in Stole and Zwiebel (1996), which results in the social surplus being allocated according to the Myerson value. We uncover two types of inefficiency: overinvestment in social relationships within group (e.g., caste, ethnicity), but… CONTINUE READING