The recent recession hit young people particularly hard. In June 2010, 15.3% of 20-to 24-year-old Americans were unemployed, compared to 8.2% for older workers. As a result, more adult children moved back to live with their parents or asked for financial help than in previous years. The share of 25- to 34-year-olds living in multigenerational households rose from 11% in 1980 to 20% in 2008. A recent survey finds that 41% of parents provide financial sup-port to their 23-to 28-year-old offspring. Indeed, parents give 10% of their income on average to their adult children. Mimi wants to support her son Jeff if he looks for work but not otherwise. Jeff (unlike most young people) wants to try to find a job only if his mother will not support his life of indolence. Their payoff matrix is

If Jeff and Mimi choose actions simultaneously, what are the pure-or mixed-strategy equilibria?

  • CreatedNovember 13, 2014
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