Department of Economics, UCSC

The optimal organization of the family requires that relations are structured so that non-cooperative game playing is minimized and transaction costs are reduced. I show that therapeutic advice for behavior within the family is to create a functioning property rights system. Punishment is shown to be inferior to setting limits because the first encourages strategic game playing. I show why there is conflict between parent and their child even when the parent maximizes the child’s expected discounted utility. In addition, I provide a model of the intergenerational transfer of behavior.