An Agency Cost Approach to Child Support DOI: http://dx.doi.org/10.18836/2178-0587/ealr.v5n2p244-254

Jaime Orrillo

Abstract


This paper deals with the investment problem  that a  separatedmother faces regarding how to finance the integral formation ofher offspring. We interpret integral formation as meaning food,education, clothing, etc. We show that the mother is indifferentin regard to the financing source, be it borrowed money fromcredit institutions or money obtained via the pension food law.This irrelevance result is obtained provided the mother promisesto not deviate the money in her own benefit, otherwise she willbear an agency cost because of the inability of commitment thatshe has in relation to an invested amount. Finally we discuss thepossibility of the child taking part in the game by transmittingsome discomfort signal or forming some coalition with his/hermother in benefit of both.

Keywords


Food pension; Full control; Agency cost; Dynamic Games.



DOI: http://dx.doi.org/10.18836/2178-0587/ealr.v5n2p244-254

Economic Analysis of Law Review  -  ISSN 2178-0587

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