 SUSTAINING INTER-GENERATIONAL ALTRUISM WHEN SOCIAL MEMORY IS BOUNDEDNo 10, Working papers from Centre for Development Economics, Delhi School of Economics Abstract: We consider an infinite horizon overlapping generation’s economy where agents are endowed with a perishable and finitely divisible good when young, and are unendowed when old. Dynamic efficiency requires some transfer of the good from the young to the old. However, such transfers cannot be supported by pure-strategy sequential equilibria when social memory is bounded, so that an agent only observes the _transfers of a finite number of previous agents. Mixed strategies allow transfers to be sustained; however, these equilibria are not robust. If each agent's utility function is subjected to a small random perturbation, these mixed strategy equilibria-unravel, and only the zero-transfer equilibrium survives. These results extend when we allow the commodity to be perfectly divisible. We also suggest that money may play an informational role in this context, as a device for overcoming the boundedness of social memory. Keywords: overlapping generations; dynamic games; monetary theory; purification of mixed stratigies (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:cde:cdewps:10 Ordering information: This working paper can be ordered from Access Statistics for this paper More papers in Working papers from Centre for Development Economics, Delhi School of Economics Delhi 110 007. Contact information at EDIRC. |
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