Anushka Chawla : anushka.chawla[at]univ-amu.fr
Laura Sénécal : laura.senecal[at]univ-amu.fr
Carolina Ulloa Suarez : carolina.ulloa-suarez[at]univ-amu.fr
We analyze the impact of networks of altruism on the demand for formal insurance. To address this issue, we introduce stochastic incomes and a formal insurance into the model of altruism in networks of Bourlès, Bramoullé and Perez-Richet (2017). Incomes are subject to both an aggregate risk and idiosyncratic risks and agents can buy a formal insurance to cover the aggregate risk. The study mainly shows that altruism induces a substitution effect in agents' incentives to uptake the insurance. Second, the nature of the interplay between altruism and the demand for insurance is price-dependent: For low price levels, the altruism network reduces incentives to take out the insurance with respect to the case of a sel sh society, while altruism fosters incentives for high enough prices. Last, incentives are aligned with welfare.
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