Uncertain altruism and investment in children.

Abstract

The authors discuss the concept of parental uncertainty about their childrens altruism and the consequences for investment in childrens human capital. In this paper we show that if parents are uncertain about their childrens altruism but are at least sure that they will receive some support from their children then the unique optimal investment is...the efficient one. Uncertainty over the exact level of the retirement gift does not alter the conclusion of the perfect-certainty case even when parents are risk-averse....Alternatively parents may not know enough about their childrens altruism to feel completely confident that some gift will be forthcoming regardless of the size of their investment. Under this assumption we show that the optimal investment must be less than the efficient amount. (EXCERPT)

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