Models of caring, or acting as if one cared, about the welfare of others

This paper surveys the theoretical literature in which people are modeled as taking other people’s payoffs into account either because this affects their utility directly or because they wish to impress others with their social-mindedness. Key experimental results that bear on the relevance of these theories are discussed as well. Five types of models are considered. In the first, the utility of people is increasing in the payoffs of another. The more standard version of these preferences supposes that only consumption leads to payoffs and has trouble explaining pro-social actions such as voting and charitable contributions. If one lets other variables determine happiness as well, this model can explain a much wider set of observations. The second class of model that is surveyed involves people trying to demonstrate to others that they have pro-social (or altruistic) preferences. In these models, altruistic acts are not necessarily sincere. Third, I consider models where people’s altruism depends on whether others act kindly or unkindly towards them. Fourth are models where inequality has a profound effect on altruism, with people being spiteful towards people who have more resources than them. Last, I discuss how specifications of altruism might have to be modified to take into account how people behave when they are able to transfer lotteries to others. ∗Harvard Business School, Soldiers Field, Boston, MA 02163, [email protected].