The need for marriage contracts: An experimental study
AbstractA spouse who invests in relationship specific human capital enlarges the size of a couple’s total surplus. Such investments typically also weaken the outside opportunities of the specializing spouse and thereby her bargaining position. Realizing this, underinvestment in relationship specific human capital may result. This reduces the couple’s potential surplus. Private or public marriage contracts can stipulate conditions to solve this holdup underinvestment problem. This paper reports about an experiment that addresses the practical relevance of this problem. We find that although underinvestment in home production occurs, it is less frequent than game theory predicts. That is: players are prepared to specialize in home production when backwards induction predicts them not to do so. Furthermore, we find that the non-investing spouses are less opportunistic towards their partners when the large surplus has been created by the spouse than when the size of the surplus is determined exogenously. Copyright Springer-Verlag 2003
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Bibliographic InfoArticle provided by Springer in its journal Population Economics.
Volume (Year): 16 (2003)
Issue (Month): 3 (08)
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Find related papers by JEL classification:
- J12 - Labor and Demographic Economics - - Demographic Economics - - - Marriage; Marital Dissolution; Family Structure
- D10 - Microeconomics - - Household Behavior - - - General
- C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
- C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
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