Strategic Interaction with Altruism: The Economics of Fait Accompli
1987 (English)Report (Other academic)
The present paper analyzes the strategic and intertemporal insteraction between two well-informed economic agents, who have more or less "altruistic" preferences vis-à-vis each others. The agents may be two individuals, a social bureau and a client, or two units in an organization, etc. It is shown that the presence of altruism in such situations easily leads to socially inefficient outcomes, in which one economic agent "free-rides" on the other's altruism. In the paper, a formal definition of free-riding is suggested, and necessary and sufficient conditions are given for it to occur in subgame perfect equilibrium. We also discuss how such free-riding might be mitigated by social security systems.
Place, publisher, year, edition, pages
Stockholm: IIES , 1987. , 46 p.
Seminar Paper / Institute for International Economic Studies, Stockholm University, ISSN 0347-8769 ; 376
IdentifiersURN: urn:nbn:se:su:diva-41558OAI: oai:DiVA.org:su-41558DiVA: diva2:331170