Lab meeting - Alexis Garapin (Université Grenoble Alpes)

Collective or Private Insurance Funds: Effects on Resource Allocation to Cope with Losses

We investigate how individuals allocate resources when facing a potential loss at the group-level. We extend the model of Blanco et al. (2020) by introducing a trade-off between two forms of collective investment: (i) investment in loss prevention, which reduces the probability of a group-level loss, and (ii) participation in collective insurance, which reduces the magnitude of the loss. In a laboratory experiment, we implement three treatments. In the baseline treatment, subjects allocate their initial endowment between an individual earnings fund and collective investment in loss prevention. Relative to the base line, the second treatment introduces the option to invest in collective insurance, while the third allows investment in private insurance. The results indicate that investment in collective insurance reduces investment in loss prevention but does not affect individual earnings. In contrast, investment in private insurance not only lowers investment in loss prevention but also reduces individual earnings. These results are robust to low and high values of the minimum loss probability.

Last modified: Tue, 24 Mar 2026 15:55:20 GMT