Premium
ALTRUISM, MATCHING, AND NONMARKET INSURANCE
Author(s) -
Chami Ralph,
Fischer Jeffrey H.
Publication year - 1996
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/j.1465-7295.1996.tb01401.x
Subject(s) - nonmarket forces , altruism (biology) , economics , matching (statistics) , microeconomics , welfare , factor market , market economy , psychology , social psychology , statistics , mathematics
Incomplete market insurance gives rise to nonmarket arrangements for coinsurance. We find that the effort altruistically linked individuals take to avoid an accident increases with the degree of altruism. If the degree of altruism is sufficiently high, an economy with nonmarket insurance yields higher social welfare than an economy without nonmarket insurance. As altruism increases, the equilibrium level of effort approaches the second‐best solution without the need for costly monitoring. Coinsurance is above (below) the socially optimal level if individuals place greater weight (less weight) on their own utility than on that of their partners.