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The need for marriage contracts: An experimental study

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  • Hessel Oosterbeek

    ()

  • Joep Sonnemans

    ()

  • Susan van Velzen

Abstract

A 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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File URL: http://hdl.handle.net/10.1007/s00148-003-0130-9
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Bibliographic Info

Article provided by Springer in its journal Population Economics.

Volume (Year): 16 (2003)
Issue (Month): 3 (08)
Pages: 431-453

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Handle: RePEc:spr:jopoec:v:16:y:2003:i:3:p:431-453

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Related research

Keywords: Marriage contracts; bargaining; experiments; J12; D10; C92; C78;

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Cited by:
  1. Marco Faravelli & Oliver Kirchkamp & Helmut Rainer, 2010. "Social Welfare versus Inequality Concerns in an Incomplete Contract Experiment," CESifo Working Paper Series 2933, CESifo Group Munich.
  2. repec:dgr:uvatin:2003099 is not listed on IDEAS
  3. Hessel Oosterbeek & Randolph Sloof & Joep Sonnemans, 2007. "Who should invest in specific training?," Journal of Population Economics, Springer, vol. 20(2), pages 329-357, April.
  4. Fehr, Ernst & Kremhelmer, Susanne & Schmidt, Klaus M., 2005. "Fairness and the Optimal Allocation of Ownership Rights," Discussion Papers in Economics 727, University of Munich, Department of Economics.
  5. Faravelli, Marco & Kirchkamp, Oliver & Rainer, Helmut, 2013. "The effect of power imbalances on incentives to make non-contractible investments," European Economic Review, Elsevier, vol. 61(C), pages 169-185.
  6. Randolph Sloof, 2003. "Price-setting Power versus Private Information," Tinbergen Institute Discussion Papers 03-099/1, Tinbergen Institute.

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