Overinvestment in Marriage-Specific Capital
AbstractWe consider the decisions of a married couple in a risky environment. The distribution of spouses bargaining power may change as a consequence of new outside opportunities that are offered to them, so that individual con- sumption may fluctuate over time. This is what we call "bargaining risk". To reduce this risk, the spouses may decide to over-invest in marriage-specific capital (which, by de?nition, is completely lost in the case of divorce) and thereby limit the attractiveness of spouses outside opportunities. This strat- egy is shown to be optimal. More suprisingly, over-investment in marriage- specific capital is still an optimal strategy when spouses are confronted to a (small) risk of divorce. This contrasts with the usual intuition.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise in its series THEMA Working Papers with number 2012-29.
Date of creation: 2012
Date of revision:
Contact details of provider:
Postal: 33, boulevard du port - 95011 Cergy-Pontoise Cedex
Phone: 33 1 34 25 60 63
Fax: 33 1 34 25 62 33
Web page: http://thema.u-cergy.fr
More information through EDIRC
Marriage; Investment; Durable Goods; Specific Capital; Risk.;
Find related papers by JEL classification:
- D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation
- D91 - Microeconomics - - Intertemporal Choice - - - Intertemporal Household Choice; Life Cycle Models and Saving
- J12 - Labor and Demographic Economics - - Demographic Economics - - - Marriage; Marital Dissolution; Family Structure
This paper has been announced in the following NEP Reports:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Shelly Lundberg & Elaina Rose, 1998.
"The Determinants of Specialization Within Marriage,"
Discussion Papers in Economics at the University of Washington
0048, Department of Economics at the University of Washington.
- Shelly Lundberg & Elaina Rose, 1998. "The Determinants of Specialization Within Marriage," Working Papers 0048, University of Washington, Department of Economics.
- Shelly Lundberg & Elaina Rose, 1999. "The Determinants of Specialization within Marriage," Working Papers UWEC-2005-07, University of Washington, Department of Economics.
- Adam, Christopher & Hoddinott, John & Ligon, Ethan A., 2011.
"Dynamic intrahousehold bargaining, matrimonial property law and suicide in Canada,"
Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series
qt4dm5w8v1, Department of Agricultural & Resource Economics, UC Berkeley.
- Adam, Christopher & Hoddinott, John & Ligon, Ethan, 2011. "Dynamic intrahousehold bargaining, matrimonial property law and suicide in Canada," CUDARE Working Paper Series 1113, University of California at Berkeley, Department of Agricultural and Resource Economics and Policy.
- Ted Bergstrom, 1995.
"Economic in a Family Way,"
_028, University of Michigan, Department of Economics.
- Pollak, Robert A, 1985. "A Transaction Cost Approach to Families and Households," Journal of Economic Literature, American Economic Association, vol. 23(2), pages 581-608, June.
- Phipps, S.A. & Burton, P.S., 1992.
"What's Mine is Yours?: The Influence of Male and Female Incomes on Patterns of Household Expenditure,"
Department of Economics at Dalhousie University working papers archive
92-12, Dalhousie, Department of Economics.
- Phipps, Shelley A & Burton, Peter S, 1998. "What's Mine Is Yours? The Influence of Male and Female Incomes on Patterns of Household Expenditure," Economica, London School of Economics and Political Science, vol. 65(260), pages 599-613, November.
- Martin Halla & Johann Scharler, 2008.
"Marriage, Divorce and Interstate Risk Sharing,"
NRN working papers
2008-03, The Austrian Center for Labor Economics and the Analysis of the Welfare State, Johannes Kepler University Linz, Austria.
- Halla, Martin & Scharler, Johann, 2008. "Marriage, Divorce and Interstate Risk Sharing," IZA Discussion Papers 3744, Institute for the Study of Labor (IZA).
- Martin Halla & Johann Scharler, 2008. "Marriage, Divorce and Interstate Risk Sharing," Economics working papers 2008-16, Department of Economics, Johannes Kepler University Linz, Austria.
- Peters, H Elizabeth, 1986. "Marriage and Divorce: Informational Constraints and Private Contracting," American Economic Review, American Economic Association, vol. 76(3), pages 437-54, June.
- Chiappori, Pierre-André & Donni, Olivier, 2009. "Non-unitary Models of Household Behavior: A Survey of the Literature," IZA Discussion Papers 4603, Institute for the Study of Labor (IZA).
- Kanbur, Ravi & Haddad, Lawrence, 1994.
"Are Better Off Households More Unequal or Less Unequal?,"
Oxford Economic Papers,
Oxford University Press, vol. 46(3), pages 445-58, July.
- Haddad, Lawrence & Kanbur, Ravi, 1990. "Are better off households more unequal or less unequal ?," Policy Research Working Paper Series 373, The World Bank.
- Tirole, Jean, 1986.
"Procurement and Renegotiation,"
Journal of Political Economy,
University of Chicago Press, vol. 94(2), pages 235-59, April.
- James M. Malcomson, 1997.
"Contracts, Hold-Up, and Labor Markets,"
Journal of Economic Literature,
American Economic Association, vol. 35(4), pages 1916-1957, December.
- Malcomson, J.M., 1997. "Contracts, hold-up and labor markets," Discussion Paper Series In Economics And Econometrics 9703, Economics Division, School of Social Sciences, University of Southampton.
- Bergstrom, T., 1995.
"Economics of a Family Way,"
95-07, Michigan - Center for Research on Economic & Social Theory.
- Johnson, William R & Skinner, Jonathan, 1986. "Labor Supply and Marital Separation," American Economic Review, American Economic Association, vol. 76(3), pages 455-69, June.
- Helmut Rainer, 2005.
"Should We Write Prenuptial Contracts?,"
Discussion Paper Series, Department of Economics
200514, Department of Economics, University of St. Andrews.
- Crawford, Vincent P, 1988.
"Long-term Relationships Governed by Short-term Contracts,"
American Economic Review,
American Economic Association, vol. 78(3), pages 485-99, June.
- Vincent P. Crawford, 1986. "Long-Term Relationships Governed by Short-Term Contracts," Working Papers 585, Princeton University, Department of Economics, Industrial Relations Section..
- Ken Binmore & Ariel Rubinstein & Asher Wolinsky, 1986. "The Nash Bargaining Solution in Economic Modelling," RAND Journal of Economics, The RAND Corporation, vol. 17(2), pages 176-188, Summer.
- Konrad, Kai A & Lommerud, Kjell Erik, 1996.
"The Bargaining Family Revisited,"
CEPR Discussion Papers
1312, C.E.P.R. Discussion Papers.
- Konrad, K.A. & Lommerud, K.E., 2000. "The Bargaining Family Revisited," Norway; Department of Economics, University of Bergen 212, Department of Economics, University of Bergen.
- Becker, Gary S & Landes, Elisabeth M & Michael, Robert T, 1977. "An Economic Analysis of Marital Instability," Journal of Political Economy, University of Chicago Press, vol. 85(6), pages 1141-87, December.
- Muthoo,Abhinay, 1999. "Bargaining Theory with Applications," Cambridge Books, Cambridge University Press, number 9780521576475, December.
- Jens Bonke & Hans Uldall-Poulsen, 2007. "Why do families actually pool their income? Evidence from Denmark," Review of Economics of the Household, Springer, vol. 5(2), pages 113-128, June.
- Klein, Benjamin & Crawford, Robert G & Alchian, Armen A, 1978. "Vertical Integration, Appropriable Rents, and the Competitive Contracting Process," Journal of Law and Economics, University of Chicago Press, vol. 21(2), pages 297-326, October.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Marion Oury).
If references are entirely missing, you can add them using this form.