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How to Preserve a Fortune: An Experimental Comparison of Foundations and Direct Transfers to the Heir

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Author Info
Werner Güth ()
Kurt-Dieter Koschmieder
M. Vittoria Levati ()
Ev Martin ()

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Abstract

Direct transfers allow heirs to freely use what has been passed on to them. Bequeathers who do not trust their descendants to make proper use of the fortune may prefer investing it in a safe foundation, thereby limiting their descendants' autonomy. In our study we compare experimentally these two institutional arrangements. Although bequeather and descendant have specific personal interests, they agree in their concern for preserving the fortune. Our results show that bequeathers tend to trust their descendant. When transfers to the descendant are less efficient than investments in a foundation, due to, e.g., inheritance taxation, overall bequests decrease significantly.

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Publisher Info
Paper provided by Max Planck Institute of Economics, Strategic Interaction Group in its series Papers on Strategic Interaction with number 2005-33.

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Length: 24 pages
Date of creation: Nov 2005
Date of revision:
Handle: RePEc:esi:discus:2005-33

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Related research
Keywords: Autonomous foundations; inheritance; efficiency; trust;

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Find related papers by JEL classification:
C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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