When pretence can be beneficial

The paper examines when unilateral and bilateral pretence may be beneficial distinguishing between positive and negative externalities. Using a two-player single period game and defining altruism, selfishness and meanness as "sentimental continuity" it is shown how the optimal level of the pretended sentimentality is determined. The novelty of the model is that the optimal degree of altruism (meanness) depends on the extent of the positive (negative) externalities.