Risk sharing with private information

This thesis studies the optimal provision of insurance in environments with asymmetric information. Individuals are subject to idiosyncratic uncertainty and wish to enter a contract with other individuals that can provide them some insurance. The basic friction present in all of the environments studied in this thesis, is that the cost of observing the realization of the individual uncertainty varies across people: while each individual might incur in little or no cost to observe shocks that affect his own utility, it might be arbitrarily costly for him to observe shocks that affect any other individual in society. To overcome this friction the optimal contract will have to provide the right incentives to individuals to report their private information. The papers in this thesis study these incentives under particular specification of the nature of the asymmetric information. The emphasis will be both positive (trying to use the nature of the optimal contract to rationalize aspects we observe in U.S. household data) and normative (characterizing the infinite horizon nature of the optimal contract).