Abstract
The rotten kid theorem states that, if a household head is sufficiently rich and benevolent towards other household members, then it is in the self-interest of other household members to take those actions that maximize the total income of the household, even at a cost to their own private income. This theorem holds under certain restrictive assumptions, but the assumptions needed for it to be true are not satisfied in many common family decision-making environments.
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Bergstrom, T.C. (2018). Rotten Kid Theorem. In: The New Palgrave Dictionary of Economics. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-349-95189-5_2325
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DOI: https://doi.org/10.1057/978-1-349-95189-5_2325
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