Journal of Population Economics

, Volume 32, Issue 3, pp 845–876 | Cite as

Endogenous divorce risk and investment

  • Andrew GrantEmail author
  • Steve Satchell
Original Paper


This paper addresses issues of divorce, consumption and investment. Divorce, in our model, is a forward put option on a non-traded variable, marital quality. We endogenise divorce so that the future decision that the couple makes will depend, inter alia, on current consumption, current wealth, investment outcomes and marital quality. We suggest a number of specifications for the bivariate utility of wealth and marital quality. We find that the mixex framework of Tsetlin and Winkler (Manag Sci 55:1942–1952, 2009) offers a useful combination of flexibility and tractability for our problem. Calibrations illustrating the usefulness of the model are provided.


Divorce Consumption-investment Two-period model 

JEL Classification

G12 G23 G24 



The authors would like to thank the anonymous referees for helpful comments and suggestions.

Compliance with ethical standards

Conflict of interest

The authors declare that they have no conflict of interest.


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Copyright information

© Springer-Verlag GmbH Germany, part of Springer Nature 2018

Authors and Affiliations

  1. 1.University of SydneyDarlingtonAustralia
  2. 2.Department of Economics, Trinity CollegeUniversity of CambridgeCambridgeUK

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