A Household Model of Careers and Education Investment

Authors

Jessica F. Young, University of BirminghamFollow

Abstract

This paper develops a two-stage non-cooperative household game, in which parents make career decisions and an investment into their child’s human capital. The model is solved for Nash equilibrium outcomes and extended for a cooperative solution. In non-cooperative pure strategies, both parents choosing to work is a Nash equilibrium, though there are alternative outcomes when the conditions underlying the career decision are varied. The investment behaviour of agents is analysed. We find that choices are critically affected by the magnitude of the cost (and reflected quality) of a high education investment relative to a low investment, and the intrinsic value that a parent places on the child’s future success. The cooperative game demonstrates parents maximise their investment in order to provide their child with a high quality education.

Recommended Citation

Young, Jessica F. (2012) "A Household Model of Careers and Education Investment," Undergraduate Economic Review: Vol. 9: Iss. 1, Article 1.
Available at: https://digitalcommons.iwu.edu/uer/vol9/iss1/1