Intrafamiliar Consumption and Saving Under Altruism and Wealth Considerations

19 Pages Posted: 24 Apr 2002

See all articles by Franz Wirl

Franz Wirl

University of Vienna - Institute of Business Administration

Gustav Feichtinger

Vienna University of Technology - Institute for Econometrics, Operations Research and Systems Theory

Abstract

This paper introduces a non-cooperative and dynamic framework of intrafamiliar decisions where the partners obtain utility from own consumption, account for the partner's benefit from consumption (altruism), and appreciate wealth. Stationary wealth (and thus stationary consumption) decreases with respect to altruism under cooperation, but increases in the subgame-perfect equilibrium in (linear) Markov-perfect strategies. Moreover, non-cooperation reduces savings and altruism mitigates this effect. However, altruism is an imperfect substitute for commitment, and of course for cooperation, because open-loop strategies, although independent of altruism, result in greater wealth.

Suggested Citation

Wirl, Franz and Feichtinger, Gustav, Intrafamiliar Consumption and Saving Under Altruism and Wealth Considerations. Economica, Vol. 69, pp. 93-111, 2002, Available at SSRN: https://ssrn.com/abstract=308891

Franz Wirl (Contact Author)

University of Vienna - Institute of Business Administration ( email )

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Vienna, A1210
Austria
+43 - 1 - 4277 38102 (Phone)
+43 - 1 - 4277 38104 (Fax)

HOME PAGE: http://ieu.bwl.univie.ac.at

Gustav Feichtinger

Vienna University of Technology - Institute for Econometrics, Operations Research and Systems Theory ( email )

Argentinierstrasse 8
A-1040 Vienna
Austria
+43-1-58801 ext. 11927 (Phone)
+43-1-5054524 (Fax)

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