The law and economics of parent and child involve several models. Before the child becomes part of the family, the actions of the parents resemble those of market participants, with the appropriate paradigm contract. Nonetheless, the fact that children are the ‘goods’ over which adults bargain, mandates some government intrusion on contractual freedom. Once parents and children form a family, the social importance of the relationship and the legal helplessness of the child suggest that the relationship differs significantly from the contract. In fact, the ongoing family is in many respects like a firm, and the principal-agent paradigm aids understanding. When the children become adults, or when the family is divided by divorce, the relationship of parent and child change but do not disappear. The relationship then approaches the franchise.
Keywords: Family, Parent, Child, Contract, Principal-Agent, Franchise