Cutting the cake with a stranger: Egoism and altruism with imperfect information

This paper investigates the classic divide-and-choose scheme and applies it to a situation in which agents can be either egoists or altruists. Egoism and altruism are defined by looking at the agents' choices as their pieces of cake are permuted. If the divider is informed about the chooser's social attitude, the resulting allocation is fair, but egoists and altruists receive unequal treatment from the application of the rule. With imperfect information about the chooser's social attitude, division is more equal. The results show that, unless the cake is already cut equally, the smaller share increases as the divider's risk aversion increases and as the subjective probability that the chooser is an egoist comes closer to one-half.