Stability in Informal Insurances

Stability deeply depends on the characteristics of the people, the norms that are in place and speci cally on the structure of such institution. [...] The charm of this result resides in the fact that it is obtained in an environment of uncertainty and it is robust to the severity of the punishment. [...] In Section 3, we set up the main features of the model and we present the results in Section 4. We conclude the paper in Section 5. Throughout the paper, we summarized the most important results in propositions and we relegated the proofs to the Appendix. [...] In the sequel, we simulate the stability of the six distinct 8-person networks in Figure 1 and we summarize the results in Table 2 and Table 3. Our goal is to identify the characteristics of networks that a ect δ. 60 For this purpose, we vary δ0 in the range of 0.18 to 0.62 and we compute the stability result for each network, keeping everything else constant. [...] The proposition states that the stability of the informal insurance institution is reinforced if the population becomes wealthier, as long as the dispersion in income remains the same.