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Should We Write Prenuptial Contracts?

  • Helmut Rainer

A successful marriage requires for both parties to make investments in their relationship and marital assets. How such assets would be divided if and when the parties divorce is an important factor determining each party’s ex ante investment incentives. Using the incomplete contracting approach, we characterize the optimal asset division rule, one that provides the parties with the best investment incentives. We then discuss the circumstances under which the spouses would agree, in equilibrium, to contract out state-imposed rules governing the allocation of marital assets upon divorce. We conclude by exploring the implications of our results in the context of various asset division rules currently discussed by policy-makers.

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Paper provided by Department of Economics, University of St. Andrews in its series Discussion Paper Series, Department of Economics with number 200514.

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Date of creation: 15 Dec 2005
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Handle: RePEc:san:wpecon:0514
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