Ch 4 Rational Altruism_Presentation

Ch 4 Rational Altruism_Presentation - PAM 200 Intermediate...

Info iconThis preview shows pages 1–4. Sign up to view the full content.

View Full Document Right Arrow Icon
PAM 200 Intermediate Microeconomics Consumer Choice Consumer Choice Altruism Example Altruism Example Chapter 4
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Chapter 4 Rational Altruism Example An altruist derives happiness from another person’s happiness. We can model this by assuming a utility function in the following form: • U(x a , x o ) = f(x a ) + b g(x o ) • x a is some measure of the altruist’s material wealth, and x o is some measure of the beneficiary’s material wealth. f() is the altruist’s utility function over her own material wealth. g() is the beneficiary’s utility function over his own material wealth. b is the weight the altruist puts on the happiness the beneficiary derives from material wealth.
Background image of page 2
Chapter 4 Rational Altruism Example We assume b > 0. Why? We assume b < 1. Why? Suppose the altruist has income I a and the beneficiary has income I o . Suppose also that there is some mechanism by which the altruist can transfer some of her wealth to the beneficiary if she wishes. Our purpose in this example is to find out if and how much the altruist will
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 4
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 6

Ch 4 Rational Altruism_Presentation - PAM 200 Intermediate...

This preview shows document pages 1 - 4. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online