Working Paper: CEPR ID: DP3842
Authors: Johan Lagerlf
Abstract: 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 under-saving 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 they are in great need by saving more that they otherwise would have done.
Keywords: Altruism; Efficiency; Saving; Signaling
JEL Codes: D64; D82
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| private information about future needs (D14) | savings level of b (D14) |
| savings level of b (D14) | transfer amount by a (F16) |
| savings level of b (D14) | belief of a about b's need (D83) |
| belief of a about b's need (D83) | transfer amount by a (F16) |
| savings level of b (D14) | signaling of b's need (D83) |
| signaling of b's need (D83) | transfer amount by a (F16) |