Abstract
Gary Becker's "Rotten Kid theorem" asserts that if all family members receive gifts of money income from a benevolent household member, then even if the household head does not precommit to an incentive plan for family members, it will be in the interest of selfish family members to maximize total family income. I show by examples that the Rotten Kid theorem is not true without assuming transferable utility. I find a simple condition on utility functions that is necessary and sufficient for there to be the kind of transferable utility needed for a Rotten Kid theorem. While restrictive, these conditions still allow one to apply the strong conclusions of the Rotten Kid theorem in an interesting class of examples.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
