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In nitely-lived agents via two-sided altruism

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  • Seghir, Abdelkrim
  • Salem, Sherif

Abstract

In an incomplete market with two sided altruistic agents and default.We show equilibrium existence if members of a dynasty act in an individualistic way by maximizing their own intergenerational utility functions. We also illustrate that a dynasty may end doing Ponzi schemes if its members act in a collectivistic way by maximizing a dynasty's collectivistic utility. We also prove that Ponzi schemes are ruled out and equilibrium existence is restored if there exist, always in the future, some agents who are not too altruistic either towards their parents or their ospring.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 31379.

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Date of creation: 21 Sep 2010
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Handle: RePEc:pra:mprapa:31379

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Keywords: Innitely-Lived Agents; Two-Sided Altruism; Individualistic Equilibrium; Collectivstic Equilibrium.;

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  1. Winter, Sidney Jr., 1969. "A simple remark on the second optimality theorem of welfare economics," Journal of Economic Theory, Elsevier, Elsevier, vol. 1(1), pages 99-103, June.
  2. William G. Gale & John Karl Scholz, 1991. "Intergenerational Transfers and the Accumulation of Wealth," UCLA Economics Working Papers, UCLA Department of Economics 624, UCLA Department of Economics.
  3. LAMBRECHT, Stéphane & MICHEL, Philippe & THIBAULT, Emmanuel, 2005. "Capital accumulation and fiscal policy in an OLG model with family altruism," CORE Discussion Papers, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) 2005027, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  4. Abdelkrim Seghir & Juan Torres-Martínez, 2008. "Wealth transfers and the role of collateral when lifetimes are uncertain," Economic Theory, Springer, Springer, vol. 36(3), pages 471-502, September.
  5. Arrondel, Luc & Laferrere, Anne, 2001. "Taxation and wealth transmission in France," Journal of Public Economics, Elsevier, Elsevier, vol. 79(1), pages 3-33, January.
  6. Magill, M. & Quinzii, M., 1993. "Icomplete Markets Over an Infinite Horizon: Long-Lived Securities and Speculative Bubbles," Papers, Southern California - Department of Economics 9321, Southern California - Department of Economics.
  7. Pradeep Dubey & John Geanakoplos & Martin Shubik, 2001. "Default and Punishment in General Equilibrium," Cowles Foundation Discussion Papers, Cowles Foundation for Research in Economics, Yale University 1304, Cowles Foundation for Research in Economics, Yale University.
  8. Steinert, Mariano & Torres-Martinez, Juan Pablo, 2007. "General equilibrium in CLO markets," Journal of Mathematical Economics, Elsevier, vol. 43(6), pages 709-734, August.
  9. Florenzano, Monique & Gourdel, Pascal & Pascoa, Mario Rui, 2001. "Overlapping generations models with incomplete markets," Journal of Mathematical Economics, Elsevier, vol. 36(3), pages 201-218, December.
  10. Bergstrom, Theodore C, 1999. " Systems of Benevolent Utility Functions," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 1(1), pages 71-100.
  11. Florenzano, Monique & Gourdel, Pascal, 1993. "Incomplete markets in infinite horizon : debt constraints versus node prices," CEPREMAP Working Papers (Couverture Orange) 9329, CEPREMAP.
  12. Magill, Michael & Shafer, Wayne, 1991. "Incomplete markets," Handbook of Mathematical Economics, Elsevier, in: W. Hildenbrand & H. Sonnenschein (ed.), Handbook of Mathematical Economics, edition 1, volume 4, chapter 30, pages 1523-1614 Elsevier.
  13. Páscoa, Mário Rui & Seghir, Abdelkrim, 2009. "Harsh default penalties lead to Ponzi schemes," Games and Economic Behavior, Elsevier, Elsevier, vol. 65(1), pages 270-286, January.
  14. Páscoa, Mario Rui & Araújo, Aloísio Pessoa de & Torres-Martínez, Juan Pablo, 2001. "Collateral Avoids Ponzi Schemes in Incomplete Markets," Economics Working Papers (Ensaios Economicos da EPGE) 419, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
  15. Varian, Hal R, 1984. "Social Indifference Curves and Aggregate Demand," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 99(3), pages 403-14, August.
  16. Abdelkrim SEGHIR, 2006. "Overlapping Generations Model with Incomplete Markets: The Numeraire Case II," Annales d'Economie et de Statistique, ENSAE, issue 81, pages 113-139.
  17. Luisa Fuster, 2000. "Capital Accumulation in an Economy with Dynasties and Uncertain Lifetimes," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 3(4), pages 650-674, October.
  18. Hernandez D., Alejandro & Santos, Manuel S., 1996. "Competitive Equilibria for Infinite-Horizon Economies with Incomplete Markets," Journal of Economic Theory, Elsevier, Elsevier, vol. 71(1), pages 102-130, October.
  19. Michel, Philippe & Thibault, Emmanuel, 2007. "The failure of Ricardian equivalence under dynastic altruism," Journal of Mathematical Economics, Elsevier, vol. 43(5), pages 606-614, June.
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