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How would I answer this question? John is an altruistic person who cares about his own income as well as the income of his best friend Ryan. The value he attaches to each unit of his own income is the same as the value of 3 units of Ryan’s income. For example, he is indifferent between a situation where his income is 1 and Ryan’s is 0 and one where his income is 0 and Ryan’s is 3. How would John rank the following outcomes (2, 10), (3, 10), (5, 7) and (5, 20), where the first component is John’s income and the second is Ryan’s? Provide a utility function consistent with these preferences.

Thanks in advance.

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    Any thoughts? Pretty easy to rank the choices, no?2017-01-06

2 Answers 2

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$value = John + 3 Ryan$ so just plug in your numbers.

What's the problem?

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Your question steps out of game theory at the moment you say "John is an altruistic person"

However, I think you can make your way back to game theory by rewriting an "altruistic income". Take the usual income, and then recalculate the one of John by applying the rule of your choice (in that case, 3 times original income plus other person's income). Then you have a game in the classical sense (with selfish players) that takes into account John's altruism.