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King Lear was worried about how his children would treat him in his old age. Much to his regret, he discovered that children do not always deliver what they promise. In addition to love and respect, children are also motivated by the possibility of an inheritance. Let us consider how a strategic use of inheritance can manipulate children to visit their parents. Imagine that parents want each of their children to visit once and phone twice a week. To give their children the right incentives, they threaten to disinherit any child who fails to meet this quota. The estate will be evenly divided among all the children who meet this quota. (In addition to motivating visits, this scheme has the advantage of avoiding the incentive for children to suffocate their parents with attention.) The children recognize that their parents are unwilling to disinherit all of them. As a result, they get together and agree to cut back the number of visits, potentially down to zero. The parents call you in and ask for some help in revising their will. Where there is a will, there is a way to make it work. But how can you make it work? You are not allowed to disinherit all of the children. Can you think of any other incentive strategy that may achieve the same desired outcome (from the perspective of the parents) i.e. the children visit once and phone twice a week? Would that strategy also work for couples with an only child? Please explain your answer.

Business Economics, Economics

  • Category:- Business Economics
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