La Crema : a case study of mutual fire insurance
Cabrales, Antonio 1964- (Universitat Pompeu Fabra)
Calvó-Armengol, Antoni (Universitat Autònoma de Barcelona)
Jackson, Matthew O. (California Institute of Technology (Estats Units d'Amèrica))

Date:	2003
Abstract:	We analyze a mutual fire insurance mechanism used in Andorra, which is called La Crema in the local language. This mechanism relies on households' announced property values to determine how much a household is reimbursed in the case of a fire and how payments are apportioned among other households. The only Pareto-efficient allocation reachable through the mechanism requires that all households.
Abstract:	honestly report the true value of their property. However, such honest reporting is not an equilibrium except in the extreme case in which the property values are identical for all households. Nevertheless, as the size of the society becomes large, the benefits from deviating from truthful reporting vanish, and all the nondegenerate equilibria of the mechanism are nearly truthful and approximately Pareto efficient.
Grants:	Ministerio de Educación y Ciencia BEC2000-1029 Ministerio de Educación y Ciencia SEC2001-0973 Agència de Gestió d'Ajuts Universitaris i de Recerca 1999/SGR-00157
Note:	Altres ajuts: NSF/SES-9986190
Rights:	Tots els drets reservats.
Language:	Anglès
Document:	Article ; recerca ; Versió publicada
Subject:	Nash equilibrium ; Risk aversion ; Utility funcions ; Fire Insurance ; Pareto efficiency ; Fire damage ; Reimbursement ; Property value ; Allocative efficiency ; Barns
Published in:	Journal of Political Economy, Vol. 111 Núm. 2 (2003) , p. 425-458, ISSN 0022-3808

DOI: 10.1086/367680

34 p, 226.8 KB

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