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Marriage, Divorce, And Asymmetric Information

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  • Leora Friedberg
  • Steven Stern

Abstract

We use data on people's valuations of options outside marriage and beliefs about spouses' options. The data demonstrate that, in some couples, one spouse would be happier and the other spouse unhappier outside of some marriages, suggesting that bargaining takes place and that spouses have private information. We estimate a bargaining model with interdependent utility that quantifies the resulting inefficiencies. Our results show that people forgo some utility in order to make their spouses better off and, in doing so, offset much of the inefficiency generated by their imperfect knowledge. Thus, we find evidence of asymmetric information and interdependent utility in marriage.

Suggested Citation

  • Leora Friedberg & Steven Stern, 2014. "Marriage, Divorce, And Asymmetric Information," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 55, pages 1155-1199, November.
  • Handle: RePEc:wly:iecrev:v:55:y:2014:i::p:1155-1199
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    File URL: http://hdl.handle.net/10.1111/iere.12086
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    Cited by:

    1. Mohammad Reza Farzanegan & Hassan F. Gholipour, 2018. "Divorce and Gold Coins: A Case Study of Iran," CESifo Working Paper Series 6873, CESifo Group Munich.
    2. Edwards, Ryan D. & Roff, Jennifer, 2016. "What mom and dad’s match means for junior: Marital sorting and child outcomes," Labour Economics, Elsevier, vol. 40(C), pages 43-56.
    3. Telalagic, S., 2012. "Domestic Production as a Source of Marital Power: Theory and Evidence from Malawi," Cambridge Working Papers in Economics 1243, Faculty of Economics, University of Cambridge.
    4. Anderson, Siwan & Genicot, Garance, 2015. "Suicide and property rights in India," Journal of Development Economics, Elsevier, vol. 114(C), pages 64-78.
    5. Leora Friedberg & Anthony Webb, 2006. "Determinants and Consequences of Bargaining Power in Households," NBER Working Papers 12367, National Bureau of Economic Research, Inc.
    6. Pablo Brassiolo, 2016. "Domestic Violence and Divorce Law: When Divorce Threats Become Credible," Journal of Labor Economics, University of Chicago Press, vol. 34(2), pages 443-477.
    7. Selma Walther, 2017. "Moral hazard in marriage: the use of domestic labor as an incentive device," Review of Economics of the Household, Springer, vol. 15(2), pages 357-382, June.
    8. repec:kap:jfamec:v:39:y:2018:i:4:d:10.1007_s10834-018-9581-8 is not listed on IDEAS

    More about this item

    JEL classification:

    • J12 - Labor and Demographic Economics - - Demographic Economics - - - Marriage; Marital Dissolution; Family Structure
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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