Altruism or Diminishing Marginal Utility?

44 Pages Posted: 28 Aug 2018

See all articles by Romain Gauriot

Romain Gauriot

University of Sydney

Stephanie Heger

Washington University in St. Louis - Department of Economics

Robert Slonim

The University of Sydney; IZA Institute of Labor Economics

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.

Keywords: altruism, marginal utility, biased inferences

JEL Classification: C91, D64

Suggested Citation

Gauriot, Romain and Heger, Stephanie and Slonim, Robert, Altruism or Diminishing Marginal Utility?. IZA Discussion Paper No. 11721. Available at SSRN: https://ssrn.com/abstract=3238546

Romain Gauriot (Contact Author)

University of Sydney ( email )

University of Sydney
Sydney, NC NSW 2006
Australia

Stephanie Heger

Washington University in St. Louis - Department of Economics ( email )

One Brookings Drive
St. Louis, MO 63130
United States

Robert Slonim

The University of Sydney ( email )

University of Sydney
Sydney, NC NSW 2006
Australia

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

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