search query: @author Calvó-Armengol, A. / total: 4
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| Author: | Cabrales, A. Calvo-Armengol, A. Jackson, M. O. |
| Title: | La Crema: A Case Study of Mutual Fire Insurance |
| Journal: | Journal of Political Economy
2003 : APR, VOL. 111:2, p. 425-458 |
| Index terms: | CASE STUDIES FIRE INSURANCE PARETO LAW |
| Language: | eng |
| Abstract: | The authors analyze a mutual fire insurance mechanism used in Andorra, which is called La Crema. This mechanism relies on households' announced property values to determine how much a household is reimbursed in the case of a fire. The only Pareto-efficient allocation reachable through the mechanism requires that all households 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, the benefits from deviating from truthful reporting vanish, and all the nondegenerate equilibria of the mechanism are nearly truthful and approximately Pareto efficient. |
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