Two-sided Altruism and Signaling
This paper shows that when donors and recipients care about each other --two-sided altruism -- the presence of asymmetry of information about the donor's income leads very naturally to a signaling game. A donor who cares about the recipient's welfare has incentives to appear richer than he is when the recipient cares about him. Similarly, asymmetry of information regarding the donor's income generates a signaling game in the presence of two-sided altruism. These signaling games put upward pressure on transfers and this pressure increases with the altruism of the recipient.
The comments of Shub Debgupta, Martin Ravallion and Debraj Ray are gratefully acknowledged. The views expressed herein are those of the author and do not necessarily reflect the views of the National Bureau of Economic Research.
Garance Genicot, 2016. "Two-sided altruism and signaling," Economics Letters, vol 145, pages 92-97. citation courtesy of