Time Consistent Matrimony with Endogenous Trust*

A simple model of marriage and divorce predicts that no marriages occur. Yet, in real life, people marry all the time in seemingly similar situations. This discordance is explained using psychological game theory. An emotional guilt effect is explicitly modeled and multiple belief-dependent equilibria become possible: some marriages don't happen, some are formed but end in divorce, some last a lifetime. For certain parameterizations a lifelong efficient marriage is guaranteed; one spouse's approval to marry signals a trust so strong as to force the other spouse to hold beliefs which make divorce exceedingly emotionally unattractive. These results may have some bearing also on other partnerships than marriage. * I am grateful to Yoram Weiss who has introduced me to this topic and has given me helpful advice. I thank also Jan Bouckaert, Eric van Damme, Eddie Dekel, Tone Dieckmann, David Frankel, Uri Gneezy, Bo Larsson, Michael Lundholm, Phil Reny, Bradley Ruffle, Frank Verboven, and Jörgen Weibull for very helpful comments or discussion. The paper is a significant revision of a chapter in my Ph.D. thesis. Part of the subsequent research was supported by a research grant from Handelsbankens forskningsstiftelser. ** CentER for Economic Research, Tilburg University, The Netherlands, and Department of Economics, Uppsala University, Sweden. Mailing address: Dept. of Economics, Uppsala Univ., Box 513, S-75120 Uppsala, Sweden. Phone: +46-18-182309, Fax: +46-18-181478, E-mail: [email protected]