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Efficiency-Enhancing Signalling in the Samaritan's Dilemma

  • Johan Lagerlof

    (WZB Berlin)

Suppose an altruistic person, A, is willing to transfer resources to a second person, B, if B comes upon hard times. If B anticipates that A will act in this manner, B will save too little from both agents' point of view. This is the Samaritan's dilemma. The logic of the dilemma has been employed in an extensive literature, addressing a wide range of both normative and positive issues. This paper shows, however, that the undersaving result is mitigated if we relax the standard assumption of complete information. The reason for this is that if A is uncertain about how big B's need for support is, B will have an incentive to signal that he is in great need by saving more than he otherwise would have done.

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File URL: http://econwpa.repec.org/eps/mic/papers/0207/0207001.pdf
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Paper provided by EconWPA in its series Microeconomics with number 0207001.

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Length: 38 pages
Date of creation: 09 Jul 2002
Date of revision:
Handle: RePEc:wpa:wuwpmi:0207001
Note: Type of Document - Tex (SWP); prepared on PC; pages: 38 ; figures: included
Contact details of provider: Web page: http://econwpa.repec.org

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  1. Lagerlöf, Johan N. M., 2003. "Efficiency-Enhancing Signalling in the Samaritan's Dilemma," CEPR Discussion Papers 3842, C.E.P.R. Discussion Papers.
  2. Neil Bruce & Michael Waldman, 1988. "Transfers in Kind: Why They Can Be Efficient and Non-Paternalistic," UCLA Economics Working Papers 532, UCLA Department of Economics.
  3. Neil Bruce & Michael Waldman, 1986. "The Rotten-Kid Theorem Meets the Samaritan's Dilemma," Working Papers 650, Queen's University, Department of Economics.
  4. Gary S. Becker, 1974. "A Theory of Social Interactions," NBER Working Papers 0042, National Bureau of Economic Research, Inc.
  5. Lindbeck, Assar & Weibull, Jorgen W, 1988. "Altruism and Time Consistency: The Economics of Fait Accompli," Journal of Political Economy, University of Chicago Press, vol. 96(6), pages 1165-82, December.
  6. Veall, Michael R., 1986. "Public pensions as optimal social contracts," Journal of Public Economics, Elsevier, vol. 31(2), pages 237-251, November.
  7. Spence, A Michael, 1973. "Job Market Signaling," The Quarterly Journal of Economics, MIT Press, vol. 87(3), pages 355-74, August.
  8. Chakrabarti, Subir & Lord, William & Rangazas, Peter, 1993. "Uncertain Altruism and Investment in Children," American Economic Review, American Economic Association, vol. 83(4), pages 994-1002, September.
  9. Laurence J. Kotlikoff, 1987. "Justifying Public Provision of Social Security," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 6(4), pages 674-696.
  10. Bernheim, B Douglas & Stark, Oded, 1988. "Altruism within the Family Reconsidered: Do Nice Guys Finish Last?," American Economic Review, American Economic Association, vol. 78(5), pages 1034-45, December.
  11. O'Connell, Stephen A. & Zeldes, Stephen P., 1993. "Dynamic efficiency in the gifts economy," Journal of Monetary Economics, Elsevier, vol. 31(3), pages 363-379, June.
  12. Bergstrom, Theodore C, 1989. "A Fresh Look at the Rotten Kid Theorem--and Other Household Mysteries," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1138-59, October.
  13. Gary S. Becker & Kevin M. Murphy, . "The Family and the State," University of Chicago - Population Research Center 87-15, Chicago - Population Research Center.
  14. Coate, Stephen, 1995. "Altruism, the Samaritan's Dilemma, and Government Transfer Policy," American Economic Review, American Economic Association, vol. 85(1), pages 46-57, March.
  15. Holmstrom, Bengt & Myerson, Roger B, 1983. "Efficient and Durable Decision Rules with Incomplete Information," Econometrica, Econometric Society, vol. 51(6), pages 1799-819, November.
  16. Hansson, Ingemar & Stuart, Charles, 1989. "Social Security as Trade among Living Generations," American Economic Review, American Economic Association, vol. 79(5), pages 1182-95, December.
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