An option pricing theory explanation of the increase in the divorce rate
This paper develops an analogy between a financial call option and a child born within wedlock. Outside marriage an unemancipated child represents a real call option to the parent who gains custody. Present value of court ordered monthly child support payment is the market price of the underlying asset. Exercise price is equal to present value of the costs of raising the child. Life of the option stretches from the date on which the divorce decree is issued to the date of emancipation for the child. Variability can be proxied by the standard deviation of the income of the noncustodial parent. A major policy implication evolves from the analogy. The perverse economic incentive of a parent (custodial) to seek custody of the child to exact economic gains out of the other parent (noncustodial) can be mitigated by reducing the value of the call option feature of the child.
If 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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 2 (1995)
Issue (Month): 6 ()
|Contact details of provider:|| Web page: http://www.tandfonline.com/RAEL20|
|Order Information:||Web: http://www.tandfonline.com/pricing/journal/RAEL20|
When requesting a correction, please mention this item's handle: RePEc:taf:apeclt:v:2:y:1995:i:6:p:174-176. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.