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The need for marriage contracts: An experimental study

Author

Listed:
  • 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

Suggested Citation

  • Hessel Oosterbeek & Joep Sonnemans & Susan van Velzen, 2003. "The need for marriage contracts: An experimental study," Journal of Population Economics, Springer;European Society for Population Economics, vol. 16(3), pages 431-453, August.
    • Handle: RePEc:spr:jopoec:v:16:y:2003:i:3:p:431-453
    DOI: 10.1007/s00148-003-0130-9
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    Citations

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    Cited by:

    1. Ernst Fehr & Susanne Kremhelmer & Klaus M. Schmidt, 2008. "Fairness and the Optimal Allocation of Ownership Rights," Economic Journal, Royal Economic Society, vol. 118(531), pages 1262-1284, August.
    2. Hodaka Morita & Maroš Servátka, 2018. "Investment in Outside Options as Opportunistic Behavior: An Experimental Investigation," Southern Economic Journal, John Wiley & Sons, vol. 85(2), pages 457-484, October.
    3. Leanne Roncolato & Alex Roomets, 2020. "Who will change the “baby?” Examining the power of gender in an experimental setting," Review of Economics of the Household, Springer, vol. 18(3), pages 823-852, September.
    4. Tore Ellingsen & Magnus Johannesson, 2004. "Is There a Hold‐up Problem?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 106(3), pages 475-494, October.
    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. François Cochard & Hélène Couprie & Astrid Hopfensitz, 2016. "Do spouses cooperate? An experimental investigation," Review of Economics of the Household, Springer, vol. 14(1), pages 1-26, March.
    7. Marco Faravelli & Oliver Kirchkamp & Helmut Rainer, 2010. "Social Welfare versus Inequality Concerns in an Incomplete Contract Experiment," CESifo Working Paper Series 2933, CESifo.
    8. Hessel Oosterbeek & Randolph Sloof & Joep Sonnemans, 2007. "Who should invest in specific training?," Journal of Population Economics, Springer;European Society for Population Economics, vol. 20(2), pages 329-357, April.
    9. Randolph Sloof, 2005. "Finite Horizon Bargaining With Outside Options And Threat Points," Theory and Decision, Springer, vol. 57(2), pages 109-142, March.
    10. Nicolas Frémeaux & Marion Leturcq, 2013. "Plus ou moins mariés : l'évolution du mariage et des régimes matrimoniaux en France," Économie et Statistique, Programme National Persée, vol. 462(1), pages 125-151.
    11. Randolph Sloof, 2003. "Price-setting Power versus Private Information," Tinbergen Institute Discussion Papers 03-099/1, Tinbergen Institute.
    12. Eisenkopf, Gerald & Nüesch, Stephan, 2017. "Trust in third parties," Journal of Economic Behavior & Organization, Elsevier, vol. 137(C), pages 410-427.
    13. Randolph Sloof & Hessel Oosterbeek & Joep Sonnemans, 2007. "Does Making Specific Investments Unobservable Boost Investment Incentives?," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 16(4), pages 911-942, December.
    14. Yadi Yang, 2021. "A Survey Of The Hold‐Up Problem In The Experimental Economics Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 35(1), pages 227-249, February.
    15. Smith, Ian, 2007. "Property division on divorce with inequity aversion," International Review of Law and Economics, Elsevier, vol. 27(2), pages 111-128.
    16. Bolin , Kristian & Lindgren, Björn, 2015. "PARENTAL INVESTMENTS IN CHILD HEALTH – the importance of paternalistic altruism, child egoism and short-sightedness," Working Papers in Economics 640, University of Gothenburg, Department of Economics.

    More about this item

    Keywords

    Marriage contracts; bargaining; experiments; J12; D10; C92; C78;
    All these keywords.

    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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