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Competing Pre-marital Investments

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  • Michael Peters
  • Aloysius Siow

Abstract

Pre-marital investments by spouses are largely viewed as public goods within the marriage. So individuals may underinvest. But individuals also use their investments to compete for spouses with higher investments. In a large marriage market, the higher equilibrium match quality obtained by increasing pre-marital investment exactly internalizes the external benefit of the investment so the competitive equilibrium is effcient. This model of competing investments in local public goods is a special case of Rosen's hedonic market model. In small marriage markets, the competition for spouses will raise incentives to invest in pre-marital investments as well as making these investments less predictable.

Suggested Citation

  • Michael Peters & Aloysius Siow, 2000. "Competing Pre-marital Investments," Working Papers peters-00-01, University of Toronto, Department of Economics.
    • Handle: RePEc:tor:tecipa:peters-00-01
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    References listed on IDEAS

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