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<p>When formal insurance is unavailable, mutual insurance among households can serve as an alternative. This paper analyzes a game between two agents who face uncertainty and maximize discounted utility without enforceable contracts or access to capital markets. While autarky is always a possible outcome, a mutually beneficial, trigger-strategy equilibrium can be achieved when the agents are sufficiently, but not necessarily equally, patient, and may have different distributions of income and willingness to bear risk. Full insurance is possible with strongly negatively correlated endowments, and partial insurance is generally feasible. Mutual insurance may well be able to coexist with organized banking and storage as these function in practice. The analysis has applications in various institutional settings, in particular to the custom of exogamy.</p>

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Mutual Insurance in the Village and Beyond

  • 期刊论文

  • 发表日期：

    2026年2月23日

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  • Clive Bell,
  • Hans Gersbach,
  • Hans Haller

摘要

When formal insurance is unavailable, mutual insurance among households can serve as an alternative. This paper analyzes a game between two agents who face uncertainty and maximize discounted utility without enforceable contracts or access to capital markets. While autarky is always a possible outcome, a mutually beneficial, trigger-strategy equilibrium can be achieved when the agents are sufficiently, but not necessarily equally, patient, and may have different distributions of income and willingness to bear risk. Full insurance is possible with strongly negatively correlated endowments, and partial insurance is generally feasible. Mutual insurance may well be able to coexist with organized banking and storage as these function in practice. The analysis has applications in various institutional settings, in particular to the custom of exogamy.