Altruism or diminishing marginal utility?

Romain Gauriot, Stephanie Heger, Robert Slonim

Research output: Contribution to journalArticle

Abstract

We challenge a commonly used assumption in the literature on social preferences and show that this assumption leads to significantly biased estimates of the social preference parameter. Using Monte Carlo simulations, we demonstrate that the literature’s common restrictions on the curvature of the decision-makers utility function can dramatically bias the altruism parameter. We show that this is particularly problematic when comparing altruism between groups with well-documented differences in risk aversion or diminishing marginal utility, i.e., men versus women, giving motivated by pure versus warm glow motives, and wealthy versus poor. We conclude by proposing two approaches to address this bias.
Original languageEnglish
Pages (from-to)24-48
Number of pages25
JournalJournal of Economic Behavior and Organization
Volume180
Early online date14 Oct 2020
DOIs
Publication statusPublished - Dec 2020

Keywords

  • Altruism
  • Biased inferences
  • Marginal utility

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