Tuesday, January 20, 2015

Bargaining for a Happy Spouse

Leora Frieberg and Steven Stern have a new paper on intra-household bargaining titled, "Marriage, Divorce, and Asymmetric Information." Survey data ask spouses two questions that essentially get at:

  • "How happy are you in this marriage?"
  • "How do you think your spouse answered this?"
They compared these answers to divorces rates five years later. Of course, they find that people unhappy in their marriages divorce more often. But also, people who are more wrong (i.e., information is more asymmetric) about their spouse also divorce more often. 

How much would you give up to avoid a divorce? When you allow that marriages involve myriad small bargains everyday (e.g,, doing dishes, picking up dirty clothes, letting him/her choose the restaurant or movie), you get even more interesting results:

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.

This last sentences is as close as economists come to saying that husbands and wives might just love each other.

17 comments:

  1. This is a very interesting question, “how much would you give up to avoid divorce?” It is a fact that the grass is not always greener on the other side. Many can attest to this adage. Consequently, they have lifetime regrets for the tradeoffs for which they settle. One would hope that in every unhappy situation in marriage, couples would give up all to save the marriage. But this does happen all the time because of short-sightedness. It should be understood that at times, there will be no beak-even outcome and a zero sum gain.

    As the laws of magnetism states, like repels and opposite attracts, so it is with many heathy thriving marriage relationships which involves a give and take to avoid a divorce situation. For the most part, the relationship dynamics in marriage, one, may have the advantage or upper hand over other, thus making somebody giving more and receiving less and surprisingly, some are happy in the situation. The same in holds true in a business transactions where the sellers have the advantage over the buyer because they knows more product mark-up prices and wholesale discounts than the buyer, which give the seller more leverage to negotiate and maximize profit. Conversely, the reverse can also happen likewise.

    It is therefore imperative that in order to achieve a healthy relationship, both parties must be willing to maximize their inputs into the marriage to get positive outcome that saves the marriage. Even though couples divorce for different reasons, one has to analyze what are the benefits and opportunity cost of these decisions. Still, a more in depth look should considered regarding what is driving a divorce decision and are there any substantial incentives in calling it quit. If individual deems the relationship a lost cause (irreparable) then the reaction to such situation would be similar to that of how businesses view sunk costs. Accordingly, even you stay in the marriage, all your investment, and the price you pay to save the marriage from divorce is not relevant to the final decision (Froeb. 2014).

    Leo Palmer ESC

    Reference:

    Froeb, MCcann, Ward, Shor. (2014) Managerial Economics. A problem Solving Approach.
    Ohio:South-Western Cengage Learning.

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  2. As the title implies, it all depends on how much value you place on happiness. From an accountant perspective I would be looking at the balance sheet and income statement to make a decision on whether to buy or sell assets depending on whether my marriage is good or bad. If the marriage is good, it may be worth investing in other assets. If it’s heading towards a divorce it may be time to sell some assets, stop doing dishes, picking up dirty laundry and take someone else to dinner and a movie! From an economist perspective, love has nothing to do with it and I would consider implicit costs and the economic profit of staying married or getting divorced. I may be able to earn more elsewhere if I’m only in it for the money! Two more things come to mind from this discussion, using the rational actor paradigm to identify problems and solutions and gathering information to make an informed decision based on facts rather than costs and, let’s not forget the sunk-cost fallacy. The price of the divorce does not vary with the decision to stay or leave once you pay the attorney or marriage counselor that costs has already been incurred.
    Froeb, L. M., McCann, B. T., Shor, M., & Ward, M. R. (2014). Managerial Economics; A Problem Solving Approach (3rd edition). Mason, OH: South-Western Cengage Learning

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  3. As I read this the phrase “happy wife, happy life” comes to mind. I absolutely loathe this phrase as it insinuates the wife in the marriage is the root of all emotions/outcomes within the relationship. I think bargaining is common and all honesty should be happening within the marriage. It can’t always be your way or the highway, if you love the other person you have no problem giving up your preference for them (sometimes, not all the times). If you’re with someone and they just go along with whatever you say they either don’t really care and are very easy going (rare), so much alike and they love all the same things (even rarer), or there is some sort of abuse if there is a disagreement. Of course those that are unhappy in the marriage divorce more often. “Trying to untie the knot is less scary than it was before. Social attitudes, financial independence and longer life expectancies have put paid to the stigma” (K.C.W.F., 2013). Women have become more financially independent and educated than previous years. They (as well as men) are less likely to remain in a marriage simply for financial and livelihood reasons.


    As economists say, there is a cost behind every decision made. For the marriage to be successful, both parties have to process the benefits and costs of the decision. There will always be trade-offs but at the end of the day it’s the willingness to bargain with one another that keeps each other happy. The value you put on the marriage also helps determine how willing one is to just walk away, and incur one large sunk cost (ie: the time and money spent on each other).


    K.C.W.F. (2013). “A Silver Lining”. Retrieved from: http://www.economist.com/blogs/blighty/2013/08/divorce

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  4. Can we really bargain for a happy spouse? Is there a bargaining power in marriage? One of the highest bargaining powers in marriage is wages, I believe the one who earns the most money; surely have bargaining power in most marriages. However, if a wife is not working, obviously she does not have any bargaining and sometimes the marriage ends up in a divorce. So here we can see clearly that the bargaining power is based on pay rate and not her earnings in the marriage. Also if both husband and wife are working, depending on who earns more and contribute equally to the household production, that spouse would have more barraging power. On the other hand if a husband or wife earnings is high, due to more work hours to the work market and he or she contributes little or nothing to the household production, he or she has little or no bargaining power.
    Although, earnings wages/money is an important factor in life, it should not be closely linked marriage. If our marriage is to survive on bargaining power based on wages earned, it can cause unhappy marriage, unhappy home, unhealthy workplace and even divorce. But if our marriage is to survive on bargaining power based on love and happiness; our divorce rate will fall and happy home, healthier workplace and even marriages will rise.

    Reference:
    1. Frobe, McCann, Ward and Shor (2014) Managerial Economics – A Problem Solving Approach.

    2. Lundberg, Shelly and Pollak, Robert A (2003) Review of Economics of the Household - Efficiency in Marriage.

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  5. In a faith based counseling center called “Smalley Relationship Center”, couples seeking counseling can expect a 90% success rate of staying together. Couples are asked to find the cause of their conflicts and are counseled to find the core fears both are unaware of. The counseling team encourages couples to find their fears from a list of twenty types of typical fears. Some of these include feeling inadequate, belittled, controlled, abandoned, rejected, and disconnected, and the fear of failure. The center also recommends that couples attend weekly small groups to pray together and keep each other accountable for their actions, a Biblical idea. One leader said, “I never lost a couple to divorce in my establishment” when following group counseling and prayer.
    A biblical faith writer wrote an article with five reasons as to why helping a wife to clean a house pays off. He found that the willingness to serve his wife created the benefit of team sharing, reinforced confidence, released humility, gratitude, creativity in being organized, and made him more attractive. He also found that a man doing household chores for his wife turns her on. Both husband and wife discovered that by creating order in their house they were able to find more peace; when things were in place they had more time to relax. Keeping their home clean also helped them to keep strife from their home. They raised their children to keep the same habits and this paid off in their own adult lives. He suggests readers give it a test, and as a married team they will be more accomplished, experience more unity and will receive an abundance of creative ideas.
    Kennedy, N (2015, March, 26) 5 reasons you should be helping your wife clean house Retrieved from http://familyshare.com/marriage/
    Bagby, L (n.d.) Gary Smalley: Keys to Marital Success Retrieved from http://www.cbn.com/family/marriage/smalley_maritalsuccess.aspx?_ga=1.71262416.130671795.1427414709

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  6. Being around our partners, by default, we tend to not necessarily treat them to the cheerful, pleasant, chirpy tones that we use when talking to people we don’t know so well. When we interact with strangers for whom we do put best faces forward, we actually get a mood boost from this positive behavior. Be nice to your partner, make small gestures & do them often. A happy marriage is based on is deep friendship, knowing each other well, having mutual respect, knowing when it makes sense to try to work out an issue, when it is not solvable. Many kinds of issues simply aren't solvable."

    Learn how to identify issues that must be resolved, that can be "fruitfully discussed," she notes. "Learn to live with the rest. Just put up with it. All you do is waste your breath and get angry over these things that can't be changed. You're better off not trying to change them. Work around them. Commit to staying together, even though this is something you don't like."

    Appreciate the surprising and overlooked sources of social interaction in our daily lives. But no two people are ever truly compatible, so quit nitpicking each other, relationship experts advise. Save the battles for the big issues -- and you'll have a happy marriage.

    Work Cited:

    Davis, J. (2015) Want a Happy Marriage? Be Nice, Don’t Nitpick. Retrieved from: http://www.webmd.com/sex-relationships/features/happy-marriage-no-nitpicking

    Schulte, B. (2013) Treat your spouse like a stranger and other surprising research on how to be happy. The Washington Post. Retrieved from: http://www.washingtonpost.com/news/inspired-life/wp/2015/03/23/treat-your-spouse-like-a-stranger-and-other-surprising-advice-on-how-to-be-happy/

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  7. I recently read and responded to another post on this site titled, “Dating Game.” It applied strategic game theory to this very issue. Your post about bargaining reminds me of my friend’s situation. He has been essentially “separated” from his wife for over 5 years in every sense of the word, except that they still reside in the same house (different floors, though). I’ve wondered why they, and couples like them, don’t just get divorced. It seems that they are bargaining. Whether they stay “together” for financial reasons, emotional ones, or for the sake of their children, they are still making a huge trade off. These people are forfeiting their ability to date/re-marry, be financially independent, etc. The only explanation for why they would do this is because they get some tangible or intangible benefit from it. So, unlike your posted quote, the spouses aren’t forgoing utility in order to make their spouse better off. They would actually be making themselves better off than they would be alone.

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  8. In any relationship, there has to be a give and take or you will reach a stalemate and nothing get accomplished which in the example would most likely equal divorce. It is the same with business, nothing gets accomplished if both parties are not willing to bargain. I don’t really agree with this article as I believe in a marriage you work to try to make each other happy and enjoy your life together, yes there is a give and take but you don’t hold money over the others head just to get something you want. In the book it talks about unions fighting to get a better contract. Their bargaining power depends on their skill level and how easily the company would be able to replace or hold out if the union were to strike. To me this example makes much more sense and is easily relatable to the topic of bargaining.

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  9. I am completely in accordance that the vast majority of the people enter into the marriage with asymmetric information about our future partner; in fact I think that if both parties had the right amount of information on each of the members that become partner of this future society, the number of divorces would radically reduce.
    I understand that this kind of radical reduction of divorces would not be the product for entering into a marriage with higher levels of awareness about your partner, as well as marriage itself. It is because in the same proportion in which these are reduced, the marriages will also be reduced or even so maybe many of these couples that have real possibilities of a healthy relationship, and a happy marriage, perhaps they won’t risk failing.
    Of course, there are many other aspects that guide a marriage, in addition to the asymmetry in the levels of information; between these aspects are the need for company, reproduction, sex, and self-realization.
    When already committed to a marriage, I understand that one of the best options that you can have is to have a divorce early in the relationship, it is less costly than a divorce later in the relationship since it reduces the windows of opportunity for a new partner.

    References: Froeb, McCann, Ward, Shor: (2014) Managerial Econonics. A Problem Solving Approach, Ohio: South Western Cengage Learning

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  10. How much would you give up to avoid a divorce?
    In terms of avoiding a divorce, it all depends on how badly you want to be with that person and the sacrifices you will make to stay with him/her. There is always bargaining in any marriage because when two people come together and start a life as one they have to adjust to one another. One person does not really know the other until they live together. Good and bad habits are learned on both sides and being able to commit to another person regardless of those good and bad habits will show how much one cares for the other and vice versa. In marriage there is really no strategy to the bargaining its simply what your will to overlook and compromise on in order to make it last.

    Reference:

    Froeb, L. M., McCann, B. T., Shor, M., & Ward, M. R. (2014). Managerial Economics; A problem solving approach (3rd edition). Mason, OH: South-Western Cengage Learning.

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  11. It is rather common knowledge that as human beings we each have our preferred way of doing things and that being able to act on our preferences satisfies us. Life would be simple if we went around doing as we prefer and acting in ways that satisfy us without considering others. In reality, the majority of human beings desire companionship and must consider the preferences of his or her companion if the relationship is to be sustained.
    The same can be said for organizations or other parties who bargain toward an all win scenario. In the case of courtship and marriage, a non strategic approach to bargaining is probably best, given the take it or live characteristic of a strategic approach may end with someone sleeping on the couch! In a quest for companionship, an individual would consider the opportunity cost for entering such a relationship, just as an organization might consider the opportunity cost for selling off, going public or considering a merger or acquisition. Another similarity in this metaphor is that if the marriage does not work out or if the business proposition does not work out, one thing is for sure. There will be lawyers involved, money spent, and employees or children left to deal with the aftermath. The lesson here is in a non strategic approach to bargaining, consider the preference of the other party and when possible, give them what satisfies them, while striving for a reciprocal response.

    References:
    Froeb, McCann, Ward, Shor: (2014) Managerial Econonics. A Problem Solving Approach, Ohio: South Western Cengage Learning
    Keese, Judy, Whichard, Natalie: (2006) The Manager as Facilitator, Connecticut: Praeger Publishers

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  12. Any relationship is about compromise. No two people are going to agree on everything, all the time. This is where bargaining comes to play. Committing to a position that is not purely self-interest may not always be easy, but in the end, in marriage especially, there is further gain for the compromise. However, the bargaining/compromising must come from both parties. If only one is willing to concede, there will eventually be conflict and no agreement will be made. Those who are mutually reliant on each other have a better chance of bargaining and coming to an agreement that they can both live with.

    How much would you give up to avoid divorce? What are the opportunity costs of forgoing a divorce? I guess that depends on how much one wants to make the marriage work. If the marriage fails and results in a divorce, can you live with the decisions you have made? I think far too often people are selfish and don’t realize that it is the little compromises that one makes for their significant other that can mean the most. And not making those small concessions from time to time can slowly tear the relationship down. If we all bargain/compromise just a little bit, it could go a long way to not only ones spouses happiness, but our own.

    Froeb, L., McCann, B., Shor, M., & Ward, M. (2014). Managerial economics: A problem solving approach (3rd ed.). Australia: South-Western Cengage Learning.

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  13. I believe that marriage is closely related to a game of chicken. Essentially in every household situation there is two possible strategies bargain hard or accommodate. It is a symmetric, simultaneous move game in which the best threat is one that you never have to use. For example, let’s take cleaning up after dinner. The decision is do you pick up the mess after our 1-year old or do you give our messy 1-year old a bath. I almost always implement the first mover strategy and commit to bargain hard; I rarely every accommodate. By moving first I am looking to capture the most gains from trade; giving the 1year old a bath is less stressful, happy and clean. Picking up the mess is disgusting and time consuming. Assuming that she is happy in our marriage would lead me to believe that I can approach the situation using the first-mover strategy, if I have asymmetric information and she is in fact unhappy, then I am bargaining hard which is a mistake. According to bargaining theory, the more that one spouse misjudges his or her partner's happiness (particularly by overestimating), the more likely he or she will bargain "too hard" and make a mistake.

    http://phys.org/news/2015-01-economists-rare-empirical-evidence-unique.html

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  14. I do not believe that any person should enter into marriage without understanding that it is almost completely made up of compromising (or bargaining). While it is customary to truly love your spouse, it does not necessarily mean that you love everything they do, say, or want. I am not sure that there is one person that can 100% state that everything their spouse did made them happy and that they never wanted a thing to change. This is simply not realistic. When in any relationship, you have to care enough about the other person to listen to their wants and needs and let them have it there way occasionally. It cannot always be able one person and this is where the compromising/bargaining comes in. If there is solely one party making the sacrifices of their own happiness to make the other happy, they will not make it in the long run. These are the couples that are going to end up divorced at some point because while one starts out unhappy in the beginning, it will eventually transform into something more that will make both parties unhappy with the marriage.

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  16. Ha, this is a good one. A happy husband and wife are a team! That being said a strategic view of bargaining exists in a marriage. As discussed in the readings (Froeb ET all, 2014), a strategic view of bargaining suggests that if you can commit to a position, you can capture the bigger share of the gains from the agreement. For example my wife hates to rake the leaves but likes to paint. I like to rake the leaves but really hate painting. I hate painting even more than she dislikes raking the leaves. Last week we needed to paint a very small room and rake the leaves. The leaves were actually a bigger job when taking into consideration the bagging and dumping process. The initial offer from my wife was that we would both paint on Saturday and then both rake on Sunday. To me there was no gain here since I really hate painting and she really hates raking. Since I hate painting even more than she hates raking I made a counteroffer. The offer was that she would paint on Saturday while I raked the leaves, also on Saturday. Although I took the lion’s share of the work I walked away with win here, for several reasons. First I would not have to paint, which by now you know I hate. Second I would be outside on a nice day raking the leaves, which by now you know I like. Finally all of the work was done on Saturday, which gave me the valuable bonus of a free Sunday!
    JG
    Froeb, L.M., McCann, B.T., Ward, M.R. & Shor, M. (2014). Managerial Economics: A Problem Solving Approach. Mason, Ohio: Southwestern Cengage Learning.

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  17. Bargaining for a Happy spouse-How much would you give up to avoid marriage? Very intriguing; A successful marriage consist of constant work, time and effort to keep it alive. It’s a living and breathing thing, and should be treated as such. Both parties should be open and willing to compromise and work together to make one another happy-even in unhappy relationships. It is the perfect example of unconditional love. At the same time, it depends on each party, and how much value they put on happiness within the marriage. Sometimes Partner A will do more than Partner B to make them happy. In such cases this creates an imbalance. Froeb states that bargaining is the ability to commit to a position that allows a player to capture the lion’s share of the gains from the trade. Sometimes this plays out in marriages and relationships.

    Froeb, L., McCann, B., Shor, M., & Ward, M. (2014). Managerial economics: A problem solving approach (3rd ed.). Australia: South-Western Cengage Learning.

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