The expectation effect of a fall in divorce costs

Official URL: http://dx.doi.org/10.1016/j.irle.2016.04.003

Under private information about spouse characteristics a fall in the cost of divorce has a direct divorce increasing effect and an indirect effect through expectations about second-marriage spouse quality. The expectation effect reinforces the direct effect if the proportion of "good" spouse types is sufficiently large in couples with marginal match qualities - in the case of unimodal and symmetric match quality distributions, if "good" spouse types are in majority and the prospective benefit from finding a "good" spouse relative to the cost of divorce is initially large. Otherwise, expectations diminish and partially offset the rise in divorce. In the presence of multiple equilibria, the expectation effect can trigger a substantial short-run change in divorce.