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MARRIAGE, DIVORCE, AND ASYMMETRIC INFORMATION
Author(s) -
Friedberg Leora,
Stern Steven
Publication year - 2014
Publication title -
international economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.658
H-Index - 86
eISSN - 1468-2354
pISSN - 0020-6598
DOI - 10.1111/iere.12086
Subject(s) - spouse , inefficiency , interdependence , economics , perfect information , imperfect , order (exchange) , offset (computer science) , labour economics , private information retrieval , microeconomics , actuarial science , computer science , sociology , social science , linguistics , philosophy , computer security , finance , anthropology , programming language
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.