Incentives to Cooperate and the Discretionary Power of Courts in Divorce Law

Abstract

In this paper, we study how the uncertainty in the behavior of judges provides parents going to separate with incentives to cooperate. Suggesting a reconciliation of the optimistic approach and of the strategic approach usually used in the economic analysis of litigation, we introduce a model of cooperative bargaining to describe the behavior of parents, whose preferences satisfy the characterization of risk averse/pessimistic types proposed by Yaari (1987) in his Dual decision Theory under Risk. The behavior of the judge is modelized in a simple manner: either he is supposed to follow a strict rule (we will say that he uses an imperative scale of alimony), or he may use discretion (he uses an indicative scale of alimony). The point is that for both parents, the judgment represents an external opportunity to divorce which may be used as the threat point in negotiation. We show that while they might be prone to cooperate, the effective decision of the parents (cooperation versus trial) depends on the specific structure of the costs and risks associated with divorce procedures. Finally, we give a characterization of the optimal degree of the judges' discretionary power required to maximize the parents' gains from negotiation.

Keywords: Cooperation in divorce, bargaining with risk averse parties in divorce litigation, scales of alimony

JEL Classification: K41, J12