Altruism and welfare when preferences are endogenous

We study whether an altruistic preference can survive in competition with other preferences and investigate the relationship between the equilibrium proportion of altruism and equilibrium material and subjective welfare. Altruism survives whenever preferences are sufficiently observable. Altruism can co-exist with reciprocal and materialistic preferences. Any policy that increases the equilibrium proportion of altruism raises economic prosperity but can reduce some people's subjective equilibrium welfare. Some of the policies that increase the equilibrium proportion of altruism are, at first sight at least, counter-intuitive. There can be a non-monotonic relationship between the degree of anonymity of interaction in society (the probability that an individual knows other people's preferences) in society and welfare.