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Regulating altruistic agents

Anthony Heyes () and Sandeep Kapur

Canadian Journal of Economics, 2011, vol. 44, issue 1, 227-246

Abstract: Altruism or `regard for others' can encourage self-restraint among generators of negative externalities, thereby mitigating the externality problem. We explore how introducing impure altruism into standard regulatory settings alters regulatory prescriptions. The optimal calibration of both quantitative controls and externality taxes is affected. It also leads to surprising results on the comparative performance of instruments. Under quantity-based regulation, welfare is increasing in the propensity for altruism in the population; under price-based regulation, the relationship is non-monotonic. Price-based regulation is preferred when the population is either predominantly altruistic or predominantly selfish; quantity-based regulation is preferred for cases in between.

JEL-codes: D62 D64 (search for similar items in EconPapers)
Date: 2011
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Handle: RePEc:cje:issued:v:44:y:2011:i:1:p:227-246