The Rotten Kid Theorem is not quite as famous as the Coase Theorem, but it’s just as neat. My colleague, Larry and I gave a presentation on a paper written about it’s implications in class yesterday. In essence, the theorem says that if you have a completely selfish kid and a parent whose utility depends on the utility of his/her kid as well as his/her own, the kid will act unselfish so as to maximize his parents’ utility. In this fashion, the selfish kid will get more income from the parents and maximize his own utility. In other words, the theorem implies that under certain conditions, we see brats actually doing yardwork.
The reason I’m posting this here is because I actually used my own family in the example, and here’s the handout to prove it: The Rotten Kid Theorem
(And yes, in my presentation, Claire was the Rotten kid. Sorry, Claire!)