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Abstract:
In this paper, an economy is analyzed where one group of agents, the altruists, cares about the well-being of another group of agents, the recipients. It is asked how changes in the size of these groups affect the altruists' charitable giving in the Nash equilibrium. I show that a pure group size effect, i.e., a proportional expansion of both subgroups can lead to less free riding and to a lower degree of underprovision relative to the efficient level of charitable giving.
