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Altruism in Networks

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  • Renaud Bourlès

    ()
    (AMSE - Aix-Marseille School of Economics - Aix-Marseille Univ. - Centre national de la recherche scientifique (CNRS) - École des Hautes Études en Sciences Sociales [EHESS] - Ecole Centrale Marseille (ECM))

  • Yann Bramoullé

    (AMSE - Aix-Marseille School of Economics - Aix-Marseille Univ. - Centre national de la recherche scientifique (CNRS) - École des Hautes Études en Sciences Sociales [EHESS] - Ecole Centrale Marseille (ECM))

Abstract

We provide the first theoretical analysis of altruism in networks. Agents are embedded in a fixed, weighted network and care about their direct friends. Given some initial distribution of incomes, they may decide to support their poorer friends. We study the resulting non-cooperative transfer game. Our analysis highlights the importance of indirect gifts, where an agent gives to a friend because his friend himself has a friend in need. We uncover four main features of this interdependence. First, we show that there is a unique profile of incomes after transfers, for any network and any utility functions. Uniqueness in transfers holds on trees, but not on arbitrary networks. Second, there is no waste in transfers in equilibrium. In particular, transfers flow through indirect paths of highest altruistic strength. Third, a negative shock on one agent cannot benefit others and tends to affect socially closer agents first. In addition, an income redistribution that decreases inequality ex-ante can increase inequality ex-post. Fourth, altruistic networks decrease income inequality. In contrast, more altruistic or more homophilous networks can increase inequality.

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Bibliographic Info

Paper provided by HAL in its series Working Papers with number halshs-00881451.

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Date of creation: Nov 2013
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Handle: RePEc:hal:wpaper:halshs-00881451

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Keywords: private transfers; social networks; altruism; income redistribution; income inequality;

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  1. Jean Mercier Ythier, 1993. "Équilibre général de dons individuels," Revue Économique, Programme National Persée, vol. 44(5), pages 925-950.
  2. Marcel Fafchamps & Flore Gubert, 2005. "The Formation of Risk Sharing Networks," Economics Series Working Papers GPRG-WPS-037, University of Oxford, Department of Economics.
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  7. Robert M. Townsend, . "Risk and Insurance in Village India," University of Chicago - Population Research Center 91-3a, Chicago - Population Research Center.
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  10. Rosenblat, Tanya & Mobius, Markus, 2009. "Directed Altruism and Enforced Reciprocity in Social Networks," Staff General Research Papers 13025, Iowa State University, Department of Economics.
  11. Manuela Angelucci & Giacomo De Giorgi, 2009. "Indirect Effects of an Aid Program: How Do Cash Transfers Affect Ineligibles' Consumption?," American Economic Review, American Economic Association, vol. 99(1), pages 486-508, March.
  12. Ingela Alger & Jörgen W. Weibull, 2007. "Family ties, incentives and development: A model of coerced altruism," Carleton Economic Papers 07-10, Carleton University, Department of Economics, revised 2008.
  13. Ingela Alger & Jörgen Weibull, 2009. "Kinship, Incentives and Evolution," Working Papers hal-00435431, HAL.
  14. Ballester, Coralio & Calvó-Armengol, Antoni & Zenou, Yves, 2005. "Who’s Who in Networks. Wanted: The Key Player," CEPR Discussion Papers 5329, C.E.P.R. Discussion Papers.
  15. Fafchamps, Marcel & Lund, Susan, 2003. "Risk-sharing networks in rural Philippines," Journal of Development Economics, Elsevier, vol. 71(2), pages 261-287, August.
  16. Arrondel, Luc & Masson, Andre, 2006. "Altruism, exchange or indirect reciprocity: what do the data on family transfers show?," Handbook on the Economics of Giving, Reciprocity and Altruism, Elsevier.
  17. Ligon, Ethan & Schechter, Laura, 2011. "Motives for sharing in social networks," CUDARE Working Paper Series 1120, University of California at Berkeley, Department of Agricultural and Resource Economics and Policy.
  18. Jean Mercier, 1993. "Équilibre général de dons individuels," Revue économique, Presses de Sciences-Po, vol. 0(5), pages 925-950.
  19. Voorneveld, Mark, 2000. "Best-response potential games," Economics Letters, Elsevier, vol. 66(3), pages 289-295, March.
  20. Joachim De Weerdt & Marcel Fafchamps, 2011. "Social Identity and the Formation of Health Insurance Networks," Journal of Development Studies, Taylor & Francis Journals, vol. 47(8), pages 1152-1177, June.
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  1. Altruism in Networks
    by maximorossi in NEP-LTV blog on 2013-11-27 12:56:46

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