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Family Bargaining with Altruism

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  • Robert A. Pollak

Abstract

The theoretical literature on bargaining ignores altruism and assumes that everyone is an egoist. Because the importance of altruism in the family is widely recognized, the egoism assumption is especially problematic in the economics of the family. This paper shows that incorporating altruism into cooperative bargaining models shrinks the set potential cooperative bargaining solutions. The analysis depends on the implications of altruism for Pareto efficiency and the implications of Pareto efficiency for potential cooperative bargaining solutions. The analysis here applies not only to Nash bargaining but to all cooperative bargaining models. For noncooperative bargaining, the analysis implies that any solution that lies outside the shrunken set of potential cooperative bargaining solutions is not Pareto efficient.

Suggested Citation

  • Robert A. Pollak, 2022. "Family Bargaining with Altruism," NBER Working Papers 30499, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:30499
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    More about this item

    JEL classification:

    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D1 - Microeconomics - - Household Behavior
    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers

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