Indifference Curve Shapes for Altruistic vs. Self-Interested Preferences (Figure 4.10)

Optimal Choices for Altruistic vs. Self-Interested Preferences in Zoë's Dilemma

Graphical Modeling of Zoë's Altruistic Choice with Indifference Curves

Zoë's Constrained Optimization Problem

Zoë's Feasible Set and Budget Constraint in the Lottery Dilemma

An individual wins £200 and is deciding how much, if any, to share with a friend. The winner's personal satisfaction increases with both the amount of money they keep and the amount their friend receives. Suppose that just before the decision is made, the winner learns that their friend has unexpectedly received a separate £50 gift from another source. How would this new information most likely alter the winner's sharing decision regarding the £200 prize?

Analyzing Preferences in a Sharing Scenario

An individual with purely self-interested preferences wins a £200 prize. This individual would be indifferent between the outcome where they keep all £200 for themselves and an alternative outcome where they keep £150 and give £50 to a friend.

An individual with altruistic preferences wins a £200 prize and is deciding how to split it with a friend. The individual's happiness increases with both the amount of money they keep and the amount their friend receives. Given this, which of the following statements most accurately describes their likely decision-making process?

Inferring Preferences from Choices

An individual wins a £200 prize and is deciding how to allocate it between themself and a friend. The individual's preferences are altruistic, meaning their personal satisfaction is positively affected by both the amount they keep and the amount their friend receives. Given four potential scenarios, which outcome would result in the lowest level of satisfaction for this individual?

Evaluating Altruism from Observed Choices

An individual wins a £200 prize and must decide how to allocate it between themself and a friend. Match each of the following preference types to the allocation choice that an individual holding those preferences would most likely make.

Deconstructing an Altruistic Choice

An individual with genuinely altruistic preferences wins a £200 prize. This means they derive personal satisfaction from both the amount of money they keep and the amount their friend receives. Given these preferences, this individual will always choose to split the prize equally (£100 for themselves, £100 for their friend), as any other distribution would indicate a lack of true altruism.