Effiency-Enhancing Signalling in the Samaritan's Dilemma

Abstract

Suppose an altruistic person, A, is willing to transfer resources to a second person, B, if B comes upon hard times. If B anticipates that A will act in this manner, B will save too little from both agents’ point of view. This is the Samaritan's dilemma. This paper shows that the undersaving result is mitigated if we relax the standard assumption of complete information, because if A is uncertain about how big B's need for support is, B will have an incentive to signal that he is in great need by saving more than he otherwise would have done.