Legal Rules, Bargaining, and Transactions Costs: The Case of Divorce
MARGARET F. BRINIG AND MICHAEL V. ALEXEEV
For almost ten years, legal commentators have been aware of the possibility of applying economic bargaining principles to the problems of negotiations at the time of divorce. 1 Although some cases and journal articles have mentioned the Mnookin and Kornhauser article suggesting that custodial time and financial assets might be exchanged, 2 attempts to apply the analysis have been confined to description. No one has attempted an empirical study to see if there really are trade-offs between custodial time and marital assets at the time of divorce, and there has been no formal model describing the process. 3 Furthermore, there has been no analytical discussion of what happens when the legal rules change, 4 either in terms of the outcomes of bargaining or in terms of the transactions costs of the process. On the other hand, there has been much attention devoted to the plight of single women with children in the era of no-fault divorce. 5
This chapter will attempt to fill the gap in the existing literature by examining the bargaining process that resolves the issues involved in divorce in the overwhelming majority of cases. 6 It will investigate the jurisprudential consequences of such a system in terms of "result" versus "rule equality," 7 and will discuss the effects of changes in the law on the resulting allocations and the extent that the parties use the court system. The authors' results suggest that trading does exist, and that changes in rules regarding grounds for divorce, alimony, property, and child custody affect not only the results reached, but also the procedures and transactions costs involved in reaching them.
There is undoubtedly a significant amount of bargaining between the divorcing spouses that occurs before the legal proceedings. 8 In fact, the legal agreement that becomes a court decree is nearly always merely a ratification of the