We would like to thank Joe Hotz, Duncan Thomas, Alex Zhylyevskyy, Guillermo Caruana, Stephane Bonhomme, Pedro Mira, Ken Wolpin, anonymous referees, and participants of workshops at UVA, USC, UCLA, UC Davis, Penn State, NYU, Iowa, Yale, Rochester, South Carolina, Montreal, CEMFI, CCER, Iowa State, SITE, Zurich, Tokyo, Penn, Paris-Dauphine, Georgia, Western Ontario, and UNC for helpful comments. All remaining errors are ours.
MARRIAGE, DIVORCE, AND ASYMMETRIC INFORMATION
Version of Record online: 28 OCT 2014
© (2014) by the Economics Department of the University of Pennsylvana and the Osaka University Institute of Social and Economic Research Association
International Economic Review
Volume 55, Issue 4, pages 1155–1199, November 2014
How to Cite
Friedberg, L. and Stern, S. (2014), MARRIAGE, DIVORCE, AND ASYMMETRIC INFORMATION. International Economic Review, 55: 1155–1199. doi: 10.1111/iere.12086
- Issue online: 28 OCT 2014
- Version of Record online: 28 OCT 2014
- Manuscript Revised: 1 JUL 2013
- Manuscript Received: 20 OCT 2010
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.