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Missing Contracts: On the Rationality of not Signing a Prenuptial Agreement

Author

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  • Antonio Nicolò
  • Piero Tedeschi

Abstract

Many couples do not sign prenuptial agreements, even though this often leads to costly and inefficient litigation in case of divorce. In this paper we show that strategic reasons may prevent agents from signing prenuptial agreements. Partners who value more the benefit of the marriage wish to signal their type by running the risk of a costly divorce. Hence this contract incompleteness arises as a screening device. Moreover, the threat of costly divorce is credible since the lack of an ex-ante agreement leads to a moral hazard problem within the couple, which induces partners to reject any ex-post amicable agreement.

Suggested Citation

  • Antonio Nicolò & Piero Tedeschi, 2006. "Missing Contracts: On the Rationality of not Signing a Prenuptial Agreement," Working Papers 20060506, Università degli Studi di Milano-Bicocca, Dipartimento di Statistica.
  • Handle: RePEc:mis:wpaper:20060506
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    File URL: http://www.statistica.unimib.it/utenti/WorkingPapers/WorkingPapers/20060506.pdf
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    References listed on IDEAS

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    Cited by:

    1. Comino, Stefano & Nicolò, Antonio & Tedeschi, Piero, 2010. "Termination clauses in partnerships," European Economic Review, Elsevier, vol. 54(5), pages 718-732, July.

    More about this item

    Keywords

    symmetric information; incomplete contracts; prenuptial agreement.;

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • K12 - Law and Economics - - Basic Areas of Law - - - Contract Law
    • D10 - Microeconomics - - Household Behavior - - - General

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