Bargaining versus non-cooperation; transaction costs within marriage

Abstract

Household labour supply models, which assume separate utility functions for the two principle household members, can be categorized as either non-cooperative or Pareto efficient bargaining games. In this paper a revealed preference non-parametric test is applied to UK family expenditure data to determine why some data observations are consistent with a Pareto efficient outcome. The empirical findings support the view that there are costs of bargaining within marriage and that they are typically related to the cost of female time. The implication being that as the cost of female time increases so do the transaction costs associated with a bargaining outcome.