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To Tie the Knot or Not

Author

Listed:
  • Padma Rao Sahib

    (Rijksuniversiteit Groningen)

  • Xinhua Gu

    (University of Toronto)

Abstract
This paper introduces imperfect information, learning, and risk aversion in a two sided matching model. The model provides a theoretical framework for the commonly occurring phenomenon of cohabitation followed by marriage, and is consistent with empirical findings on these institutions. The paper has three major results. First, individuals set higher standards for marriage than for cohabitation. When the true worth of a cohabiting partner is revealed, some cohabiting unions are converted into marriage while others are not. Second, individuals cohabit within classes. Third, the premium that compensates individuals for the higher risk involved in marriage over a cohabiting partnership is derived. This premium can be decomposed into two parts. The first part is a function of the individual's level of risk aversion, while the second part is a function of the difference in risk between marriage and cohabitation.

Suggested Citation

  • Padma Rao Sahib & Xinhua Gu, 2002. "To Tie the Knot or Not," Demographic Research, Max Planck Institute for Demographic Research, Rostock, Germany, vol. 6(13), pages 355-382.
    • Handle: RePEc:dem:demres:v:6:y:2002:i:13
    DOI: 10.4054/DemRes.2002.6.13
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    References listed on IDEAS

    as
    1. Bloch, Francis & Ryder, Harl, 2000. "Two-Sided Search, Marriages, and Matchmakers," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 41(1), pages 93-115, February.
    2. Ken Burdett & Melvyn G. Coles, 1997. "Marriage and Class," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(1), pages 141-168.
    3. Burdett, Kenneth & Coles, Melvyn G, 1999. "Long-Term Partnership Formation: Marriage and Employment," Economic Journal, Royal Economic Society, vol. 109(456), pages 307-334, June.
    4. Robert Shimer & Lones Smith, 2000. "Assortative Matching and Search," Econometrica, Econometric Society, vol. 68(2), pages 343-370, March.
    5. Larry Bumpass & James Sweet, 1989. "National Estimates of Cohabitation," Demography, Springer;Population Association of America (PAA), vol. 26(4), pages 615-625, November.
    6. John Ermisch & Marco Francesconi, 2000. "Cohabitation in Great Britain: not for long, but here to stay," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 163(2), pages 153-171.
    7. Waters, Melissa S. & Ressler, Rand W., 1999. "An economic model of cohabitation and divorce," Journal of Economic Behavior & Organization, Elsevier, vol. 40(2), pages 195-206, October.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Audrey Light & Taehyun Ahn, 2010. "Divorce as risky behavior," Demography, Springer;Population Association of America (PAA), vol. 47(4), pages 895-921, November.
    2. Chhabra, Meenal & Das, Sanmay & Sarne, David, 2014. "Expert-mediated sequential search," European Journal of Operational Research, Elsevier, vol. 234(3), pages 861-873.

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    More about this item

    Keywords

    risk; class partition; stochastic dominance; cohabitation; marriage; risk aversion;
    All these keywords.

    JEL classification:

    • J1 - Labor and Demographic Economics - - Demographic Economics
    • Z0 - Other Special Topics - - General

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