Divorce costs and marital dissolution in a one-to-one matching framework with nontransferable utilities

In this paper, we use a two-period one-to-one matching model with incomplete information to examine the effect of changes in divorce costs on marital dissolution. Each individual who has a nontransferable expected utility about the quality of each potential marriage decides whether to marry or to remain single at the beginning of the first period. Those who married in the first period learn the qualities of their marriages at the beginning of the second period and then decide whether to stay married or to unilaterally divorce. We show that for any society, there exist matching environments where the probability of the marital dissolution is not decreasing in divorce costs under a gender-optimal matching rule. In such environments an allocation effect of divorce costs with ambiguous sign outweighs an incentive effect which is always negative.