Formal Insurance and Altruism Networks

We study how altruism networks affect the adoption of formal insurance. Agents have private CARA utilities and are embedded in a network altruistic relationships. Incomes subject to both common shock large idiosyncratic shock. can adopt insurance cover show that ex-post transfers induce interdependence ex-ante decisions. characterize Nash equilibria game. decisions substitutes number adopters is unique equilibrium. The demand for lower with than without at low prices, but higher high prices. Remarkably, individual incentives aligned social welfare. extend our analysis CRRA fixed utility cost adoption.