In this market model of divorce2, the most important variable is the divorce rate. The x-axis measures this value, the quantity of divorces. According to economic convention, the price of divorce should then go on the y-axis. In this model, the price of divorce can be thought of as the utility of marriage. The utility of a marriage corresponds to the price of divorce in the sense that in tells us how bad a marriage must be before it ends in divorce. When society is intolerant of divorce, the utility of a marriage must be very low before it can end in divorce. Alternatively, when society is more tolerant of divorce, it allows marriages that have a higher utility to end in divorce, not forcing the couple to stick with the marriage until the utility of marriage dips to an extremely low level.
The utility level at which society legally allows couples to end marriage has changed over the past thirty years. Until 1970, in order to get divorced, one spouse had to show that the other spouse had committed some fault of marriage, such as adultery or abuse. This corresponds to society requiring that the utility of marriage dip to a fairly low level3 before it can be ended by divorce. Starting in 1970 with California's adoption of no-fault divorce, fault-based divorce laws were replaced by no-fault divorce laws in every state.4 Currently, every state has some form of no-fault divorce. This means that in order to obtain a divorce, no fault needs to have been committed by either party. All that is necessary is that one party wishes to get divorced.5 Under no-fault divorce policy, society allows marriages to end in divorce when the marriage is at a higher level of utility compared to the utility requirement of fault-based divorce. The utility requirements for divorce translate into a perfectly elastic supply curve at the level of utility at which society allows divorce. The change from fault-based to no-fault based divorce laws is equivalent to an upward shift of the supply curve.6
The demand for divorce is determined by the number of married couples who wish to get a divorce. The lower the utility level of a marriage, the more likely it is that a couple will seek a divorce. This translates into a downward sloping demand curve with a higher demand for marriage at lower levels of utility. The demand for divorce at any given level of utility comes as a result of utility comparisons made by each spouse in a married couple: comparisons between the utility of marriage and the utility of divorce.7 A spouse wishes to get divorced when the utility from divorce is higher than the utility from staying married. When both spouses experience higher utility by getting a divorce, the marriage will terminate. When both parties experience gains from the marriage, the couple will stay together. What happens when one spouse experiences utility gains from marriage and the other spouse experiences gains from divorce? From an economic standpoint, economic efficiency dictates that the marriage should be terminated if the joint gains of divorce8 are higher than the joint gains of marriage. And in the opposite case when the joint gains of marriage are higher than the joint gains of divorce, the marriage should remain intact. According to the Coase Theorem, the efficient outcome should be reached regardless of the assignment of property rights.9
Be Sure to Continue to Page 2 of "The Market For Divorce".
