Altruism

4.4 of The Economy 1.0 & The Economy #2

What does altruistic preferences entail?

-Where one is willing to bear a cost in order to help another person

What does social preferences entail? What is included here?

-Preferences that place a value on what happens to other people, even if it leads to lower payoffs for the individual.

-Altruism, spite, and envy can be seen as social preferences

What does a zero sum game entail?

-A game where the payoff gains and losses of the individuals sum to zero, for all combinations of strategies they may pursue

-This graph, which shows how Anil will divide her lottery winnings, showcases a zero-sum game. Why

-Any change in a point from the feasible frontier means that one will gain at the expense of the other’s loss.

What would Anil’s indifference curves look like if she was 100% selfish and somewhat altruistic?

-When completely selfish, Anil will have a completely vertical indifference curve. Completely indifferent if Bala gets a lot or not. Thus, she would prefer a curve further to the right.

-If she somewhat cared, then she would gain utility from giving to Bala. Thus, her indifference curve would slope, and the optimisation point would be such that MRS = MRT.