A Dynamic Model of Altruistically-Motivated Transfers

Daniel Barczyk and Matthias Kredler

Review of Economic Dynamics, 2014, vol. 17, issue 2, 303-328

Abstract: This paper studies a dynamic Markovian game of two infinitely-lived altruistic agents without commitment. Players can save, consume and give transfers to each other. We identify a continuum of equilibria in which imperfectly-altruistic agents act as if they were a perfectly-altruistic dynasty which is less patient than the two agents themselves. In such equilibria, the poor agent receives transfers until both effectively pool their wealth and tragedy-of-the-commons-type inefficiencies occur. We also provide a sharp characterization of strategic interactions in consumption and transfer behavior. This provides new insights relative to existing two-period models. It allows us to differentiate between the Samaritan's dilemma - e.g. a child runs down its assets inefficiently fast in anticipation of transfers - and what we refer to as the Prodigal-Son dilemma - e.g. parents do not leave an early bequest, anticipating a child's profligate behavior. (Copyright: Elsevier)

Keywords: consumption-saving decisions; inter-vivos transfers; altruism; differential games (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (11)

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Working Paper: A Dynamic Model of Altruistically-Motivated Transfers (2009)
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DOI: 10.1016/j.red.2013.07.002

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