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Infinitely-lived agents via two-sided altruism

Seghir, Abdelkrim and Salem, Sherif Gamal (2010): Infinitely-lived agents via two-sided altruism.

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In an incomplete market with two sided altruistic agents and default. We show equilibrium existence if members of a dynasty act in an individualistic way by maximizing their own intergenerational utility functions. We also illustrate that a dynasty may end doing Ponzi schemes if its members act in a collectivistic way by maximizing a dynasty's collectivistic utility. We also prove that Ponzi schemes are ruled out and equilibrium existence is restored if there exist, always in the future, some agents who are not too altruistic either towards their parents or their ospring.

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