MARRIAGE, DIVORCE, AND ASYMMETRIC INFORMATION

Leora Friedberg and Steven Stern

International Economic Review, 2014, vol. 55, issue 4, 1155-1199

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.

Date: 2014
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https://doi.org/10.1111/iere.12086

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Working Paper: Marriage, Divorce, and Asymmetric Information (2010)
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