Question

Describe the ways in which couples are allocated to one another in today’s “marriage market” can be characterized by bids and offer “prices” and contractual agreements. If “markets” tend to clear, what would that imply for what equilibrium in the marriage market looks like if it is working well? What does the current equilibrium in the marriage market look like? What does that imply about how well the marriage “market” works? Does this mean “markets” do not work? Or something else?

Answer 1

There is a huge pool of literature in economics and psychology which deals with the rationale behind marriages. In this answer, I will try to give an economics overview of why marriages happen and why they sustain. We will start with an assumption behind why men and women are interested in marriages.

Since we know that marriages are done voluntarily on the part of the partners or their parents, it makes sense to assume that their utility must be higher together than if they were single. Thus, marriage should make both the persons better-off. In economics, an individual's utility is increased when their consumption increase. In marriage also, we have to define the gains of marriage in terms of some product which is consumed by the partners in the marriage contract so that it would be easy to explain the logic. These can be of economic or psychological relevance like the quality of meals, quality, and quantity of children, prestige, companionship, love, health, joint wealth etc. Children are one of the biggest reasons why marriages happen. Many of the other factors can be obtained if people of the same sex decide to stay together. But, one of the biggest reason why most of the marriages happen between people of the opposite sex is to raise children. Thus, if we define X as the product of a marriage that the male and female consumes, then in the market of marriage each individual chooses a mate which maximizes his/ her utility over the whole horizon of time. (by consuming maximum X).

In a marriage, an individual has to give their own time in marriage to make it successful or in the economic sense, produce X (compassion, love or wealth). Both the partners together makes a production function which involves their time. The efficiency of the production function will depend on the complementariness of the individuals in the marriage contract. As time is limited for every individual, there is a constraint to allocate time between earning wage 'w' or consume other factors of X (like love or sex). Giving time in labor will earn them a wage 'w' which become the opportunity cost when giving time to other factors. Both individuals have to cooperate and allocate time in such a way which maximizes the output X. The cost can also include legal cost, cost of searching the mate or to determine whether marriage is worthwhile. Thus, for an individual, the gains from marriage should compensate for the costs involved over the whole horizon of time.

So if there are n males and n females in the marriage market, there can be n! different combinations that permit each Male to marry each Female and vice versa. Thus to answer your first part, it can be assumed that people make bids (by signaling) in order to get the best possible partner for them and then get into a contractual agreement which defines the rules of the game so that individuals take into account the whole horizon of time into consideration while making decisions. Sometimes contractual agreements increase the legal cost of divorce.

If the market tends to clear, it would imply that the gains from marriages have outweighed the costs of divorce or the gains from being single not in the current period but in the future also. The increased utility gives incentive for the individual to stay in the marriage contract.

The marriage markets work very different in western society than in eastern society.

Individual's in western society mostly choose their mates on their own (love marriage) and rates of divorce are quite high. The reason could be that either they are not able to access gains from marriage over the whole time horizon or the cost of divorce is too less as both the partners can survive individually also because of financial independence

Whereas, in eastern societies, both parents and individuals involved take the decision of matching. The divorce rate is lower and one of the reason is many females are financially dependent on their male counterparts which makes the divorce very expensive for them.

To answer the last part, there is information asymmetry between the two parties which sometimes lead to marriage failure in the future. But that does not mean that the market does not work as mostly all individuals in the world get married in their lifetime and the market helps them to provide them with an appropriate match according to their constraints.