Leadership delegation in rotten kid families

Abstract

In a family context with endogenous timing, multiple public goods, and alternative parental instruments, we show that the optimality of authority (leadership) delegation for the sequential-action game played by rotten kids and a parent depends crucially on the degree of heterogeneity in the kids’ preferences. For homogeneous kids, the rotten kid theorem—the situation in which rotten kids find it desirable to internalize all externalities that arise in the family setting—holds irrespective of the parental policy instrument, implying that it is optimal to delegate leadership to the kids. If the kids are heterogeneous, however, parental leadership yields a first best outcome if the kids are economically dependent and agree on the tradeoff between public goods. For economically independent kids, parental leadership is optimal if the degree of heterogeneity is sufficiently high. These findings provide us with empirically testable hypotheses and contribute to the debate regarding the social desirability of the ‘authoritative parenting style’.