Final exam！
Bargaining II: What determines the threatpoints?
ECON 339: determination of threatpoints in marital bargaining
1
1
Threatpoint # 1: never marry (forward looking) or divorce
If the alternative to a cooperative outcome is being single – either never marrying, or divorcing – then the threatpoint utility for each party is the best they can achieve if they are single.
This generally depends on
i) laws: division of marital property upon divorce
who can hold property
inheritance
ii) earning potential
iii) social norms: did you watch “Mad Men”?
http :// www.post-gazette.com/tv-radio/2010/07/25/Mad-Men-series-inaccurately-depicts-difficulties-of-divorce-for-women-in-60s/stories/201007250142
Text covers some evidence in chapter three – read it.
“earnings potential”
- most of the complications arise when there are children. Why?
1. has one partner cut back on market work to stay home with the children? If so, how easy is it to re-enter the market?
2. If the children are young, how easy is it to find childcare at the right cost, with the right hours (part time, weekends and evenings…)
3. potential wages depend on human capital – acquired either through education (level, major) or work experience. If expected to spend time out of the market for homework, would this affect education choice?
Threatpoint # 2: Non-cooperative equilibrium within marriage.
Rather than trying to cooperate, each individual acts to maximize their own best interest, taking as given the choices of the other (pp 75-77 in text)
(Usually the non-cooperative Nash equilibrium is used as the outcome)
Perhaps acting more as room-mates than partners, but still living together.
If this is the threatpoint within marriage, changes in divorce laws will not affect division of welfare within marriage – but who gets the child benefit cheque might.
Canada: universal child care benefit
“To receive the UCCB, you must meet the following conditions:
You must live with the child, and the child must be under the age of 18.
You must be the person who is primarily responsible for the child’s care and upbringing. Primarily responsible means that you are responsible for such things as supervising the child's daily activities and needs, making sure the child's medical needs are met, and arranging for child care when necessary. If there is a female parent who lives with the child, the CRA usually considers her to be this person. However, it could be the father, a grandparent, or a guardian.”
Source: http://www.cra-arc.gc.ca/uccb /
(bold and italics mine)