Strategic Ethics: Altruism without the Other-Regarding Confound

In a two-stage investment-effort game, we model altruistic investment in another agent's capacity to benefit from synergies between the two agents' efforts. We conduct the theoretical analysis of the game by assuming that agents who invest in others have no direct utility from their giving behavior, i.e., without considering other-regarding preferences. Results of a laboratory experiment confirm our behavioral prediction that, for a low enough investment cost, subjects coordinate on a positive complementarily-building investment, which in turn boosts their effort in the second stage. The latter increases in both own and others' complementarily-building investment, as predicted by our model. All this holds independently of subjects' risk and inequity aversion.