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In nitely-lived agents via two-sided altruism


  • Seghir, Abdelkrim
  • Salem, Sherif


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.

Suggested Citation

  • Seghir, Abdelkrim & Salem, Sherif, 2010. "In nitely-lived agents via two-sided altruism," MPRA Paper 31379, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:31379

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    References listed on IDEAS

    1. 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.
    2. Arrondel, Luc & Laferrere, Anne, 2001. "Taxation and wealth transmission in France," Journal of Public Economics, Elsevier, vol. 79(1), pages 3-33, January.
    3. Pradeep Dubey & John Geanakoplos & Martin Shubik, 2005. "Default and Punishment in General Equilibrium," Econometrica, Econometric Society, vol. 73(1), pages 1-37, January.
    4. 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.
    5. Winter, Sidney Jr., 1969. "A simple remark on the second optimality theorem of welfare economics," Journal of Economic Theory, Elsevier, vol. 1(1), pages 99-103, June.
    6. Aloisio Araujo & Mário Rui Páscoa & Juan Pablo Torres-Martínez, 2002. "Collateral Avoids Ponzi Schemes in Incomplete Markets," Econometrica, Econometric Society, vol. 70(4), pages 1613-1638, July.
    7. Stéphane Lambrecht & Philippe Michel & Emmanuel Thibault, 2006. "Capital Accumulation and Fiscal Policy in an OLG Model with Family Altruism," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 8(3), pages 465-486, August.
    8. William G. Gale & John Karl Scholz, 1994. "Intergenerational Transfers and the Accumulation of Wealth," Journal of Economic Perspectives, American Economic Association, vol. 8(4), pages 145-160, Fall.
    9. Magill, Michael & Quinzii, Martine, 1996. "Incomplete markets over an infinite horizon: Long-lived securities and speculative bubbles," Journal of Mathematical Economics, Elsevier, vol. 26(1), pages 133-170.
    10. Abdelkrim Seghir & Juan Torres-Martínez, 2008. "Wealth transfers and the role of collateral when lifetimes are uncertain," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 36(3), pages 471-502, September.
    11. Magill, Michael & Shafer, Wayne, 1991. "Incomplete markets," Handbook of Mathematical Economics,in: W. Hildenbrand & H. Sonnenschein (ed.), Handbook of Mathematical Economics, edition 1, volume 4, chapter 30, pages 1523-1614 Elsevier.
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    13. Hal R. Varian, 1984. "Social Indifference Curves and Aggregate Demand," The Quarterly Journal of Economics, Oxford University Press, vol. 99(3), pages 403-414.
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    18. Páscoa, Mário Rui & Seghir, Abdelkrim, 2009. "Harsh default penalties lead to Ponzi schemes," Games and Economic Behavior, Elsevier, vol. 65(1), pages 270-286, January.
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    More about this item


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

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers
    • D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets

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