Posted: August 9th, 2022

Common Preference and Bargaining Models

Common Preference and Bargaining Models
1. What are the key features of standard preference models?
A common preference model is a standard theoretical framework used for generating demand functions, where their comparative statistics are used in solving marriage and divorce problems. Additionally, the standard preference model analyzes the labor supply, as well as consumer behavior (Little, and Zeitzoff, 2017). The common preference model also treats a family as one decision-making agent , consisting of one budget constrints, and one utility function, that consist of leisure time, and consumption of each family member. Compared to other models, the standard preference model does not have a theoretical framework, where agents can differentiate expected utilities inside and expectations outside marriage.
2. How do bargaining models differ from standard preference models?
The bargaining model differs from the common preference model when it comes to pooling assumptions. According to the bargaining model, the government plays a significant role in affecting distribution within marriage, which is done by transferring control of resources from one partner to another and changing the income of divorcees (Little, and Zeitzoff, 2017). On the other hand, the standard preference model suggests that pooling hypothesis policies are ineffective and do not influence family resources. According to the common reference model, the equilibrium intrahousehold allocation depends entirely on the income distribution among family members.

3. How do the two bargaining models we covered differ from one another?
The cooperative bargaining model and noncooperative bargaining model differ. Suitable bargaining models include the Nash bargaining model, the divorce-threat, and the sphere bargaining model (Little, and Zeitzoff, 2017). The Nash bargaining model suggests that the family demands depend on the determinants of the threat point, the total family income, and prices. According to the cooperative bargaining models, the bargaining outcome depends on the threat point, and both the wife and the husband control the pay.
According to the separate sphere model, any policy that involves the reallocation of income within a marriage affects the family demand. Both the divorce-threat and the individual sphere models imply that cooperative bargaining does not mean income pooling; hence the bargaining results result from a steady income and threat point (Little, and Zeitzoff, 2017). On the other hand, the noncooperative bargaining model believes in Pareto outcomes and self-enforcing equilibria. The noncooperative game theory does not think that binding agreements promote intrahousehold allocations.

4. Why do economists care whether common preference or bargaining models more closely approximate reality?
Because both models are linked with education and earning opportunities in women and women empowerment, which has provided women with equal opportunities in households, especially when it comes to income, for instance, the decision making in a home can be made through common preference approach, where a family can be treated as a single pooled budget, as well as one utility function (Little, and Zeitzoff, 2017). Also, based on the bargaining model, decision-making is determined by bargaining power between the wife and the husband, and children excluded, unlike in common preference.
5. From the perspective of a divorce-threat bargaining model, which issues affect married women’s threat points? Explain.
The women’s threat point in divorce-threat bargaining is income and environmental factors. The issues, however, are external.
6. From the perspective of a separate-spheres bargaining model, which issues affect married women’s threat points? Explain.
The issues affecting married women’s threat point includes all factors within the marriage, which is different from the divorce threat, where most of the time, the women and men in marriage solve their issues.

7. Which of the policy issues discussed in these excerpts is most relevant from the perspective of a standard preference model? Explain.
The policy states that property bought before marriage should be returned to the buyer in case of divorce (Little, and Zeitzoff, 2017). According to the income preference, the allocation of resources after divorce depends on the income distribution of the spouse, where each spouse takes their own-bought resources.
8. Which of the policy issues discussed in these excerpts is most relevant from the perspective of a divorce-threat bargaining model? Explain.
Mistresses would not be allowed to sue their married lovers on promises of money, properties, or money, and wayward husbands are not allowed to sue their mistresses upon any goods or money promised (Little, and Zeitzoff, 2017). The court, however, does not assist retrieve the items unless the wayward husband or the mistress pretended to be single. According to the divorce-threat policy, the threat point is the maximum utility attainable outside the marriage.
9. Which of the policy issues discussed in these excerpts is most relevant from the perspective of a separate-spheres bargaining model? Explain.
The marriage law policy allows wives to claim and recover properties, goods, and money from a mistress. The approach, however, rules in favor of the wife because society recognizes the wife. The policy is based on social norms but not preference (Little, and Zeitzoff, 2017). According to the separate sphere, the allocation of resources after divorce depends not on income but gender specialization. The most socially recognized get the share, for instance, the husband. However, the resources are allocated based on social norms and not preference or productivity, such as in the standard reference model.

Reference
Little, A. T., & Zeitzoff, T. (2017). A bargaining theory of conflict with evolutionary preferences. International Organization, 71(3), 523-557.

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