Taking the awkwardness out of a Prenup—A Game Theoretic solution
I would strongly advise you to look at the short review on Thomas Schelling’s Strategy of Conflict posted on Less Wrong some time back. The idea that deliberately constraining one’s own choices can actually leave a person better off in a negotiation is a very interesting one. The most classic game theoretic example of this is the game of Chicken. In the game of Chicken, two people drive toward each other on a wide freeway. If neither of them swerve, they both stand to lose by way of substantial financial damage and possible loss of lives. If not, the first one to swerve is the proverbial “chicken” and stands to lose face against the other person who was brave enough to not swerve. If one person were to throw away their steering wheel and blindfold themselves before driving on the freeway, that would force the other person to swerve given that the first person has completely given up control of the situation.
There is a slightly more generalizable example of a similar principle at work. Suppose you wanted to buy a used car from a car dealer and were prepared to pay up to $5000 for the car and the car dealer in turn was willing to sell it for any price above $4000. In such a situation, any price between $4000 and $5000 is an admissible solution. However you ideally want to pay as close to $4000 as possible, while the car dealer would like you to pay close to $5000. In a such a situation, each party would pretend that their “last price” (the price that represents the worst possible outcome for them, which they would nonetheless be willing to accept) was different from the true last price, since if one party realizes the other party’s true last price, that party can put it to effective use in the negotiation. Let us now assume a situation wherein you and the car dealer know perfectly well about the each other’s financial details, the degree of urgency in having the transaction done etc., and have a very reliable idea of the last price of the other person. Now, you can break the symmetry and get the best possible deal out of the situation by deliberately handicapping yourself in the following fashion. You sign a contract with a third party individual which states that if you happen to do this transaction and pay more than $4000, you will have to pay the third party $1500. Now, all you need to do is show this contract to your used card dealer which would make it clear to him that your last price has now shrunk to $4000 since paying anything above that effectively means paying in excess of $5500 which is well past your original last price.
For countries that face the menace of airline hijacking, it can likewise be an effective deterrent to future hijackers if release of terrorists or other kinds of negotiations with hijackers were explicitly prohibited by the country’s laws, and these laws would be impossible to overturn during a hijacking incident.
This brings to mind the following question. Why don’t there exist companies that explicitly sign contracts with individuals or other entities for a fee, which would handicap the entities in some way that cannot be easily overturned and consequently give them negotiating leverage as a result.
One example I can think of is pertaining to wealthy individuals in California and other US States with Community Property laws. Given the high divorce rates in the US, it would be prudent for such individuals to have as tight prenuptial agreements as possible prior to getting married, to minimize financial loss in the event of a divorce and also to avoid financially incentivizing one’s spouse to initiate a divorce with a promise of a financial windfall. However there are some practical difficulties which might make many such individuals shy away from doing this. A couple of the practical issues are:
A. It is clearly rather unromantic to have to haggle with one’s fiancée and their lawyers regarding a prenuptial agreement. The implied “lack of belief” in the potential durability of the marriage might be a turn off for one’s partner and other close people involved.
B. The individuals themselves might get carried away by emotion and believe that they have found “the one” and assign a much lower probability of divorce or forcible concessions that they would need to make in future when faced with the threat of divorce. In such a situation, they would fail to realize that probably 50% of Americans who felt they found “the one” just like them, went on to eventually get divorced.
Now imagine the beneficial role a company signing such contracts could provide. The individual in question could sign a contract with this company stating that if they were to get married without a bullet proof pre-specified prenuptial agreement, the company could lay claim to half their net worth immediately after the wedding were registered. Ideally, the individual in question could sign such a contract when they were single or not seriously seeing anyone with the intention of getting married. The advantage of such a contract is the following:
1. Community property and other modern divorce laws essentially change the defaults with regard to what happens in the aftermath of a divorce, compared to how marriages worked prior to the existence of such laws. Such a contract would reset the default state to one where neither party would financially profit in the aftermath of a divorce. Most of the awkwardness comes when trying to override the default state with a bunch of legal riders at the time of a wedding.
2. The advantage of signing up for a contract well in advance is that the aforesaid individual is then not exposed to issues A and B above. Signing a tight pre-nuptial agreement in the background of such a contract, simply means that the individual in question has no desire to part with half their finances to this third party company. It makes no implicit statement about the individual’s probability estimate for the durability of the marriage. There always exists the plausible explanation that the individual in question was opposed to non-prenup marriages in the past, but now saw no need for that given that they subsequently found “the one”. However they are constrained by a certain contract they signed in the past that they are now powerless to change.
Do you know if there are entities that play the role of the third party company with regard to signing contracts that enable people to handicap themselves and consequently come out stronger in future negotiations? Do you know of people who did this specifically with regard to prenuptial agreements? If such companies don’t exist, is that a potential business opportunity? I would love to hear from you in the comments.
I decided a few weeks ago that upon getting married I will sign a pre-nup which specifies that all of my children will receive paternity testing without exception. This constrains my options in a way that prevents goal distortion in myself and certain types of mistrust in the hypothetical husband.
Potential disadvantage: doing so signals that you’re the sort of person who would benefit from such an agreement; i.e. someone who considers them-self vulnerable to goal distortion, and/or likely to be not trusted by their partner.
Alternately it signals that one is sufficiently immune that ensuring a means will exist for their partner to measure this will be beneficial.
Right. The intended signal is “I am so sure that I will not cheat (at least with the particular result of a child) that I don’t mind guaranteeing I’ll get caught if I do”.
The phrase between parentheses is a critical issue, since it is extremely easy—and, in fact, the default—to cheat without producing illegitimate offspring, thus making the prenup fairly worthless.
It’s actually likely to make things worse, since swearing that “I will not cheat and get pregnant” is going to bring one’s attention to the backdoor—i.e. that you never promised not to cheat outright. It looks like a classical and extremely clumsy deception.
Unless, that is, you’d be happy with your husband being suspicious of you at the same time he is confident that his child is really his.
Of course I would also promise not to cheat outright; this just doesn’t have the convenience of being so easily verifiable.
It seems like a reasonable way to signal fidelity in advance. Guys can do paternity tests pretty easily these days—if they have doubts—though… and girls realise that. So, maybe this doesn’t buy you that much—in practice.
The point is not to wait until there are doubts. Getting to the point of actionably strong doubts is half the problem.
If there are to be doubts they will probably begin before birth—when testing is not practical. Testing after the doubts begin seems to be a pretty likely outcome.
Also, I figure the guy is going to want to be the one who administers any paternity testing. A test administered by the girl leaves some opportunity for deception by switching samples.
Testing to resolve uncertainty over paternity seems like a good case of humans consciously and deliberately caring about the welfare of their genes. Some seem to think that evolution’s motivation for a man to reproduce his genes comes is in the form of sexual desire and pleasure—but for many, this is just not so.
I think the legal details of this will need to be worked out but this is certainly very interesting! In theory, such a move ought to make you a more desirable wife and ought to prevent certain types of mistrust in the hypothetical husband. I doubt both of these would pan out in practice though, unless you are fairly certain to restrict your pool of potential husbands to the ultra-rationalists (who probably barely even exist in practice), or to guys who would a priori have preferred paternity testing, even before you bring it up to them.
I don’t understand how that would make sense. What happens if you renege on such a contract, and how does it change things relative to the normal situation anyway? Even without any contract, if your husband wants to test the kid no matter what, he can dispute paternity until the test is done and the evidence is there. The details of course vary between jurisdictions, but I think this should be the case pretty much everywhere.
(Also, I’m not a lawyer, but I’m not sure if contracts of this sort would be enforceable in any case. From what I’ve red, prenups are ruled unconscionable fairly easily, and I can easily imagine a judge finding this sort of thing ethically fishy. But I’m just speculating here; if someone more knowledgeable is around, it would be interesting to hear from them.)
Even if it’s unenforceable, it changes the dynamic of raising the question. In the normal state, asking for a paternity test could reasonably cause offense—“Are you saying I cheated?”. Writing up the contract makes the test the default, and then not wanting the test would be suspicious—“What, now you change your mind? You said you’d test them all.”
Yes, but would be the advantage of formalizing such a deal in a prenup, rather than just committing yourself to it verbally and informally? Why waste the money for the lawyer fees?
There is a realistic chance that I will forget having said any given thing I say.
Using lawyers as the most expensive kind of diary ever is… actually not as bad as how they’re ordinarily used, in fact.
Expensive signaling?
Probably not a good idea. It’ll weird any potential husband out. See Vladimir’s comment above.
Sigh … Rationalists are still a long way away from winning …
It wouldn’t weird me out, but I am not at all typical. Though I doubt Alicorn’s hypothetical husband would be typical either.
Typical people are boring! Why would I want to marry one? Then I might have typical children. Ew.
I find this comment adorable, and wish I could upvote it more than once.
Even with a typical husband, I doubt you are in any danger of having typical children. I based my prediction on “Typical people are boring!” Full Stop.
I would be surprised but all right with it. I am I think more “typical” than most LWers.
I like the idea.
Curious: how are prenup violations enforced? I assume with predefined monetary penalties settled at divorce.
Haha, when I googled LW for “goal distortion” I didn’t expect the first hit to be Alicorn! :) I was thinking that Justin should write a post, but he’s busy all the time. Problem is, he’s thought about it more than anyone else, I think. Merrrrr.
Maybe I should start a startup that requires you to pay a $1000 fee if you do business with anyone who signs a precommitment contract intended to give them a negotiating advantage.
Then, if two of your clients did business with each other, they would both have to pay the fee, right?
How about a startup that requires you to pay a similar fee for paying any contractually-obligated fee without first taking it to civil court for trial or settlement? Just sneak an advertisement in between the pages of the bar exams, and you’re set.
Any thoughts on an optimal (game-theoretic) strategy in this universe?
How would you get around the problem of the weirdness signal sent by such a measure? Sure, if everyone was doing it, there would be no such problem, but if you assume away the problem of collective action, many other more convenient solutions are also available in that idealized world. If you’re the only one doing it, I would say that the weirdness signal is likely to be more dangerous once she finds out about it than if you just said openly “I want a prenup, here’s the deal, and it’s my way or the highway.”
The nonweird version of this is “my parents or business partners demand it.”
Do people actually pull that off? What’s the “business partners” story? Do you have to have equity in a startup or something so that the story is the partners not wanting to share equity with your wife if she divorces you?
Yes, more often the parents one (backed by inheritance). Very common for rich parents worried about avaricious spouses.
This.
Missing link?
I believe he means “Yes, that’s the type of thing I had in mind as a ‘business partners’ scenario”.
This.
A common expression in Portuguese is “isso” (pronounced eeee-so), literally meaning “this” and used with the exact connotation you’ve used it. Usually the speaker overemphasizes the stress on the “i”, and the intended sentiment is conveyed very strongly, even when the recipient is a non-native speaker such as myself.
From a purely denotational perspective, the equivalent in English makes sense. However, when I read it to myself in my head, it just doesn’t feel right. You can’t modulate the pronunciation of “this” in any way to convey the same connotation. As is it looks and feels silly.
I’ll stick to the standard English translation, “Exactly!”, at least until people adopt the Portuguese, “Isso!” (which we all should, it’s just so fun to say and perfect for the situation. Try saying it. eeeeeeee-so!)
Spanish has the same thing, but it’s spelled “eso” which means “that” and pronounced ‘eso’ with the e as in “bet”.
You’re right: http://blogs.forward.com/the-bintel-brief/121028/
This of course comes at the risk of stirring up bad blood between your wife and parents, but since people don’t care that much about extended families these days, many men would probably believe it to be worth the price. In any case, it is an interesting Schellingian real-life story.
Women too, presumably?
I was referring to the specific situation from the linked story. But yes, of course, an analogous comment would apply in the reverse case. Though there would be significant differences in more subtle details of the situation, since the relevant customs and rituals don’t feature identical expected roles for the sexes. Consider e.g. who is expected to make the marriage proposal, which obviously influences the initial and consequent state of the negotiation (or conflict, as per Schelling). (Even in those unconventional cases where these norms aren’t followed, the very fact of deviation from the norm and its acknowledgment have significant consequences.)
For what it’s worth, I recently heard or read a piece (i I don’t have a cite) claiming that marriage proposals in the old sense are becoming less common.
Instead, marriage is discussed in advance, possibly for months, instead of the man making a surprise offer.
I don’t have the exact numbers at hand, but I’m pretty sure that in the overwhelming majority of cases, marriages are still preceded by rituals and customs with greatly different sex roles. For example, quick googling yields this Slate article according to which more than 80% of marriages involve the woman receiving an expensive diamond engagement ring from the man—which is just one element that indicates fundamental asymmetry in their strategic positions.
Even if more and more marriages deviate from the most standard norm, it still means that the sides typically aren’t faced with equivalent strategic situations in the highly ritualized negotiation process, which is relevant for the question of what happens when non-standard approaches are attempted that risk blowing things up by signaling weirdness. But this is a complex topic on which much time could easily be spent.
No so much anymore, in most states of the US. If the proposal is accepted, the ring becomes a part of the couple’s community property. If the proposal is rejected, the man gets the ring back (it is legally considered a “conditional gift” in most states, which the prospective fianceé must return if she refuses or breaks off the engagement). Either way, the ring remains the property of the proposer, so it doesn’t really cost him anything to propose.
You’re right that engagement rings have mostly lost their former economic function as a collateral of commitment. However, despite these legal changes, it’s not correct to say that the ring doesn’t cost the proposer anything. If the engagement is broken, he’ll get it back, but it can’t be resold for anything near the original price, and reuse for a subsequent woman is out of the question (well, he could try, but it would be considered an insulting move leading to a near-certain disaster, and if he tried it surreptitiously, the consequences would be even more catastrophic if discovered). Moreover, even as a part of the couple’s community property, it’s a white elephant asset that will never be sold except in direst desperation, doesn’t yield any rent or interest, and just sucks up money for insurance, so for all practical purposes, the man has parted with a significant amount of money by buying it.
You’ve changed my mind: there is a real cost to the ring. I considered the ring a thing equal in value to its price but didn’t think it through enough to realize that after it’s bought it only retains much value (as sentimental value to the couple) if the proposal succeeds. Thanks for the links; I had no idea diamonds were so over-priced.
Was it seriously ever any other way? That’s hard for me to imagine. A surprise offer? Without the couple ever discussing it before? Even if the man proposes, as is traditional, would someone really propose without talking about it first?
This cry of “was it ever done any other way?” strikes me as historically naive… arranged marriages happened, after all, and still happen. During certain space-time periods I understand it is/was customary to have much younger brides than grooms, in which case it seems more reasonable to surprise rather than discuss (since the groom may not have a great desire for the young bride’s opinions in the matter).
In any case, it seems the question should be answered by a historical sociologist...
Well, yes, of course arranged marriages happened, but arranged marriages were typically discussed and planned among the families involved. I’m referring to this idea of marriage proposals in the “old sense”, where the groom springs the question on the bride and it’s the bride’s decision to accept or reject, right then. (Maybe I’m misunderstanding something.)
If we’re to believe almost every (American) movie ever to include a marriage proposal, then yes.
(On the other hand, movies can be rather slow to reflect changing cultural norms. I think the “If anyone knows any reason blah blah speak now or forever hold your peace” line is only done in movies now. Still, such cliches had to originally come from somewhere.)
I average going to about 2 weddings a year, and I think most weddings I go to still have it. I’m pretty sure Catholic services still mandate it.
This is false. You may be remembering the questions of intent in the Rite of Catholic Marriage, in which the priest asks both spouses to state their intent to marry. (The consent of spouses, freely spoken, has traditionally established the marriage in Catholic belief.) There is no question asked of the assembly.
Here’s an excerpt of this part of the rite, including a link to the whole marriage ceremony:
http://www.catholicweddinghelp.com/topics/text-rite-of-marriage-mass.htm
The current Book of Common Prayer, however (used by Episcopalians and Anglicans), does seem to preserve this language. I think it was originally an English custom in any case.
http://justus.anglican.org/resources/bcp/marriage.pdf
It’s probably no surprise that the default movie mode in the United States would be Anglican, not Catholic.
Thanks for the cite
This is probably the piece you meant.
How can I get one of these?
Defeating a dragon usually does the trick. Might be outdated advice, though.
So why are you thinking of marrying someone who has this sort of aversion to weirdness?
Trouble is, just about everyone does. It’s another regular part of the human social signaling games.
I know I’ve been citing Bryan Caplan an awful lot lately, but he really has a knack for explaining this sort of thing with magnificent clarity, so I’ll point to his classic blog post “Why Be Normal?”:
http://econlog.econlib.org/archives/2005/03/why_be_normal.html
Caplan explains why weirdness aversion makes sense for employers, not people in general.
Just about everyone may have an aversion to weirdness, but you’d also refuse to marry just about everyone, isn’t that right?
In both cases, sending off strong weirdness signals significantly reduces one’s chances of finding any sort of employment, or wife, at all — and even if some options remain available, they are inferior to what would be available without the weirdness signal.
I am not sure I understand what exactly you believe to be the essential difference between the two situations, so that the same signaling model doesn’t apply in both.
Weirdness signals characteristics like not being a hard worker or not behaving in a predictable manner, which are more important in an employee than a spouse.
Even if the only bad traits signaled by weirdness were those disliked by employers, that would still automatically make them relevant for potential spouses too. Unemployability, or even reduced employability, is normally a highly undesirable trait in a spouse.
Moreover, weirdness has many other bad consequences too. In all sorts of relations between people, including informal and non-commercial ones, weird behavior provokes rumors and ostracism, increases the probability of conflicts, makes finding friends and allies difficult, and typically binds one to very low status. It also signals higher probability of increasingly weird behavior in the future, which might result in all sorts of nasty situations, including legal problems and violent incidents. Since people typically expect to spend the larger part of their life with their chosen spouse, they are rational to err on the side of caution and break the deal as soon as any statistically sound heuristic raises alarm.
Of course, there are exceptions. On occasions, someone’s peculiar individual weirdness becomes fashionable for art and entertainment purposes, making it a ticket to high status and perhaps even wealth. Alternatively, a potential spouse might share one’s peculiar taste for weirdness and consider it a plus. But I don’t see how these exceptions, or any others I can think of, are relevant for the particular case we’re discussing, namely weirdness signaled by shifting the customary rules and rituals of marriage negotiation by means of an odd-looking legal innovation.
Weirdness isn’t a single thing, nor is it reliably that crippling.
There are a lot of married people in science fiction fandom. And a lot of employed people, though I believe a great many of them conceal their weirdness from their employers.
A few moderating factors for weirdness—you might have an advantage with mates whose weirdness matches yours. This is most obvious for sexual minorities.
Sub-cultures are a way for people to be weird together—they represent a local, variant sort of normal. This probably won’t have the same advantages as mainstream normal, but it’s less costly than being weird all by yourself.
Some weirdness is actually advantageous, or at least Reform Jews and Unitarians have higher incomes than the average.
If there are really advantages to a particular non-standard marriage contract, then talking about wanting that contract is as much a test for finding a compatible mate as it is a debility.
To my mind, the big risk of non-standard contract is that there’s likely to be much less information about its effects than there is for a standard contract.
NancyLebovitz:
That is true, but you understate the case here. If there is a significant subculture where your particular weirdness is the norm, it’s a far more advantageous position than having a peculiar individual weirdness, not just because other individuals are around with whom you can establish social relations that won’t suffer from the weirdness signal, but also because its existence and public prominence demonstrates to the wider society that this particular sort of weirdness is compatible with, and in fact typically accompanied by, being a well-behaved, functional, and productive person. (This of course assuming that your subculture actually is like that; if the subculture attracts lots of deviants and the consequent bad press, it may well make things even worse.) Under these conditions, the relevant characteristic will no longer trigger people’s weirdness heuristics, and it will move under the entirely different category of minority taste—which can still have repercussions for one’s social relations and status, but far milder ones. I would say that the sci-fi fan subculture falls squarely into this category.
Your example of sexual minorities provides another illustration. Observe how those sexual minorities that have struggled successfully for improved status in recent decades have basically followed this public relations tactic: presenting themselves as groups of folks who are on average no less functional, productive, and well-behaved than the rest of society, and insisting that therefore their peculiar characteristics should not trigger people’s weirdness alarms. This is also why mentioning particular behaviors that are viewed negatively in the wider society, and arguably more prevalent in some such groups, is often taken as prima facie evidence of underhanded hostility against them—it threatens to reinforce the weirdness heuristics that are still turned against them in the minds of significant numbers of people.
I don’t think any religious affiliation sends off significant weirdness signals in the modern North American culture, except out-and-out loony cults and a small number of denominations that, for various reasons, have a bad public image and thus give off a cultish vibe. Certainly, Reform Jews and Unitarians seem to me well within the standard perceptions of the bounds of normality.
Of course, there are plenty of religious folks who insist on marrying someone of the same religion, as well as atheist folks who couldn’t bear being married to someone religious, but such incompatibilities arise due to a simple acknowledgment of incompatible tastes, values, and goals, not because people’s weirdness heuristics get triggered.
Yes—and this is only one of the many reasons why weirdness heuristics are on the whole statistically sound. When people offer you deals that seem weird, very much unlike the way things normally done in your culture, there is a non-negligible probability that you might get swindled in ways you’re not smart and knowledgeable enough to figure out.
Agreed. I wish I could upvote this twice.
Interesting idea. For some reason it has a very “Robin Hanson feel” to it. (I had to scroll back up to check if he was the author, in fact)
Agreed! In fact I was toying with the idea of emailing Robin this idea in a couple of lines as a potential idea for a future post at overcomingbias. I finally overcame inertia and went on to compose this :)
The interesting figure should be the fraction of Americans who divorced, among those who “felt they found the one”, not the fraction of Americans who “felt they found the one” among those who divorced.
Yeah that’s what I meant but wrote the sentence clumsily. Have corrected it now.
But can you keep the 50% figure while changing what it denotes? Where does the figure come from?
The 50% american divorce rate is mostly in line with published statistics. I don’t think it is unrealistic to assume that an overwhelming majority of folks getting married, feel that they are getting married to “the one”, so I am just keeping the 50% figure. In any case getting this number to be very accurate is not important to the argument, so I didn’t care to get the best possible estimate of this possible.
Then say “a fair portion of”, not “50%”. Saying “50%” gives an illusion of actual data.
I’m not so sure.
I wrote “probably 50%”. I guess it could be reasonably inferred that this is an extrapolation using my best guess coupled with actual numbers.
Write “half”, or (if you’re feeling pedantic), “~half”.
There are a couple of legal devices that people use for just this type of “strategic commitment” in regards to divorce
the first is called a “spendthrift trust” or a domestic asset protection trust. Prior to marriage you put all of your assets into a trust that benefits you, but that you do not “control.” the legal conceit here is that, since you do not really control these assets, but rather they are held in trust for your benefit, you could not have contributed these to communal property when you got married. so unlike the post, your assets are “confiscated” even before you get married.
the second place I’ve seen is in closely held partnerships for PE and Hedge funds. If you are partner as part of joining the partnership you signed an agreement that basically said, that your future spouse can never own part of the partnership and what ever part of the partnership is granted to her by a judge or settlement is immediately retroactively nullified. hard core.
I think this kind of strategic-legal hacking is very promising. Another example would be a company that wants to commit itself to a certain product. Say Apple wants to commit itself to producing the iPad, so they could sign a contract that says, if they fail to manufacture 100K iPads per year until the year 2020, they forfeit 10 billion dollars. That commitment would encourage developers who are considering iPad development and companies thinking about integrating the iPad into their IT architecture. It would also deter rival tablet manufacturers.
This is not legal advice, obviously, especially since you are not affiliated with Apple:
That kind of contract is specifically forbidden by most kinds of American contract law because of a lingering free labor ideology. The concern is that if Apple changed its mind about whether it wanted to ‘work for’ the third-party commitment company, it might not have 10 billion dollars, and so it would face a choice between work or bankruptcy; that kind of choice can be too close to indentured servitude, and indentured servitude is un-American. The logic gets pretty ridiculous when the party in question is a huge corporation that doesn’t have to sign a contract like that if it doesn’t want to, but “deterring rival tablet manufacturers” isn’t necessarily a good thing either—we want some competition in the consumer technology marketplace.
It could also be something like “Apple will auction off some of it’s property (a subsidiary, intellectual rights to something valuable, some real estate …) to the highest bidder if it doesn’t manufacture 100K iPads”, with the condition that it can’t sell that property before 2020, but can otherwise use it normally. This keeps most of the advantages of the 10 billion dollars as incentive, without the side effect of risking bankrupcy or tying the money down.
Could they sign up a contract for with one or more of the companies supplying the individual iPad components for 100K pieces a year until 2020, with a hefty penalty for breach of contract, and loudly publicise the deal? They’d lose the option of switching suppliers in case a better one came along, but it may be worth it given the strategic payoff.
(That is assuming the company in question doesn’t have a vertical monopoly, controlling all production steps from the ore mines to quality testing, which is a very reasonable assumption for nearly every physical product)
What if the contract specified that it would pay 10 billion dollars only if it could afford to?
Then if it looked like they would have to pay, they could tie up all their money in irrevocable long-term investments.
OK, they could put $10 billion in a trust that they would be required to give up if they didn’t manufacture enough iPads.
I think you can see the problem with the policy of tying up an amount of money you can’t afford to lose: that you probably need that money to run your normal business, and that the interest on an equivalent loan would probably cost more than the plan was worth to you.
Great idea. Very clever.
Perhaps someone has said this already, but it’s worth noting that if you did this in the car dealer example, car dealers could sign similar contracts—your deal would not go through.
Then, negotiating with car dealers would have a game theoretic hawk/dove or snowdrift equilibrium. Similarly with potential wives. They could sign contracts that agree they will never sign prenups—another hawk/dove equilibrium.
I’m baffled by this logic. If the two people want to be together, but have incompatible contracts, then they still get to be together. They just won’t marry. This is still a total win for the pro-prenup-contractor, who doesn’t risk losing any money. But it’s a loss for the anti-prenup contractor, since they don’t get to gain any money.
In contrast, the person without an anti-prenup contract gets to be married, but can’t get their hands on the pro-prenup contractor’s money.
Which of these two sounds more socially acceptable? And which is more likely to seem desirable to the type of person the pro-prenup contractor would prefer to marry in the first place?
I don’t know of a company that does this specifically to help people signing contracts, but there’s a Shelling-type deal called Stickk which I believe is non-profit.
Of course this type of preprenup being common would create a market for the opposite preprenup “I will not agree to a prenup or I will pay max(my_net_worth,partners_net_worth)/2”.
Actually it would make sense for the same company to market both of them. They could even pay something to get young people to agree to these contacts financed by the conflicts the preprenups would create later on.
Three comments, in decreasing order of seriousness.
1) The law prevents you from waiving some rights, and this could be viewed as waiving such an “inalienable right”. Also, how do you define a bullet-proof pre-nup? What if its constraints conflict with the other party’s pre-nup?
2) So would you call such a contract a “pre-pre-nup”? What if someone did a pre-pre-pre-nup where they agree not to marry anyone’s who’s signed a pre-pre-nup?
3) Why don’t you post something of actual RELEVANCE to the people who come he...
Oh. Nevermind. Good advice!
(1) and (2) seem pretty easy.
If there is a contradiction in pre-pre nups, either one party reneges on the contract and pays the stiff price or the marriage doesn’t take place. When you opt for such a pre-pre-nup you are presumably willing to eliminate the pool of potential partners who are fundamentally opposed to the terms of your pre-pre-nup. Think of this as ideally no different from a situation when community property and other similar laws were abolished. In such a situation, you are free to turn down suitors who want pre-nups that enforce community property laws, or have pre-pre-nups which bind them to the same.
contracts are made illegal by law. With my limited knowledge it seems that it should be possible to make contracts that achieve these, possibly by some circuitous means. Of course I am no lawyer and don’t know the fine points.
You only need a contract like this if there is only one party with whom you can make your deal. So the marriage example is a good one (unless you are alpha and indifferent enough to pull off: “if you won’t sign the prenup my other Fiancée will”). However the used car example is silly. You don’t need a contract stating that you will be penalized for paying more than $4000. You can just get a competing dealer to make an offer in which case this competing offer becomes your upper bound.
I realize it may seem like I’m fighting the hypothetical here, but the OP seems confused as to why these sorts of commitment devices are not widely used. The answer is that it is a big world with plenty of alternatives and competition serves the same function without risking loss.
You are right about competition serving quite a useful purpose in the real world. However the real world is not like financial markets where you have liquidity by the milli second with regard to competing offers. If competition did a great job of providing an alternative in real time, they would be no need to do the following in pretty much any negotiation
Pretend that you have lots of time and are in no hurry to close this deal with the other party or anyone else.
Pretend that you looked up and found/know of much better deals elsewhere that what the other party is offering. Alternatively claim that the competing deals you are getting are much better than they truly are.
Pretend that your “last price” is very different from your true last price.
If competition were doing an amazing job, there would be no reason to do 1-3 above.
You say above “you can just get a competing dealer to make an offer which becomes the upper bound”. If you are a person who is putting time to productive use, it would not be unreasonable to value your hour at well over $50. The question is therefore whether you can find competing offers without spending 10-20 hours which would pretty much erode your whole margin of savings.
I don’t know game theory very well, but wouldn’t this only work as long as not everyone did it. Using the car example, if these contracts were common practice, you could have one for 4000 and the dealer could have one for 5000, in which case you could not reach the pareto optimum.
In general, doesn’t this infinitely regress up meta levels? Adopting precomittments is beneficial, so everyone adopts them, then pre-precomittments are beneficial… (up to some constraint from reality like being too young, although then parents might become involved)
Is this (like some of Schelling’s stuff I’ve read) more instrumental than pure game theory? I can see how this would work in the real world, but I’m not sure that it would work in theory. (Please feel free to correct any and all of my game theory)
Schelling’s introduction mentions that his work sits in a space between pure theoretical game theory and purely pragmatic or psychological bargaining. A pre-commitment is part of a bargaining process, so if you can pre-commit before the one you’re bargaining with (not necessarily chronologically) you win. If you both pre-commit simultaneously, you both lose.
How about making a pre-commitment that only applies if the other person hasn’t made one?
Because you need to know if they’ve made a commitment, and using old information can get you burned if as stated, you pre-commit simultaneously.
OK, then a pre-commitment that only applies if you have no solid information that the other person has one in effect. (I don’t think those adjustments should have been difficult to make.) Makers of pre-commitments are incentivized to broadcast their commitments with credible info to back them up, right?
The car example has the two actors signing contracts with opposing goals.
I can’t see why someone would set up beforehand a contract that prevented them from signing a prenup. The reluctance to prenuptial arrangements only appears after you’ve met “the one”, and all that the anti-prenup actor is concerned with is the motivation of the pro-prenup actor, and signing a counter-contract won’t allay that.
I work for a company that resells and recycles used electronics. As we work with larger and larger suppliers, it’s become necessary to file for compliance with RIOS, R2, and other environmental certification organizations. A large part of what this entails is purposefully sacrificing our ability to handle hazardous materials in ways that are entirely legal, to gain credibility with other companies as being ‘green’. That reputation is worth a lot, to the point where we’ve invested hundreds of thousands of dollars in time and fees for the certification, never mind the lasting cost to our operations standards. It’s not a perfect match for the scenario you’re suggesting, as the standards are targeted, and the certification organizations themselves do provide some services. Its intended effect is arguably closer to advertising than manipulation, but it still boils down to exploiting 3rd party verified limitations in negotiation.
One general question, folks. This is my first lesswrong post. What do I need to have this post as part of the “promoted posts” and consequently accessible to more readers of this site. Till today I never even noticed the new tabs post, which is currently the only easy way to reach my post.
Thanks.
— About Less Wrong
My understanding is that one of a handful of editors has to manually promote your post, which they tend to do if (a) they wrote the post, (b) the post gets a high (about 20+) score, or (c) it’s about a Less Wrong meetup.
To be fair, the editor in question doesn’t promote all of their own posts.
Absolutely—I didn’t mean to imply that was the case.
This post is rather long for the front page, and should thus contain a break.
Please, NO!… the break is already there, at the bottom of the screen. To get past it, push the page down key, or scroll using whatever method your browser allows.
The statement that you trust someone absolutely, more often heard of future spouses than any other time, is one of the most arrogant things you can say. You are not only saying you trust the other person, which is quite reasonable, but you are also saying you could not possibly be mistaken. Given the rate at which people actually do make mistakes, especially when their emotions are running high, a pre-nup strikes me as quite reasonable insurance.
People don’t feel “I love him/her, therefore I must absolutely trust him/her”. They feel “I absolutely trust him/her, that means I love him/her”.
That’s depressingly plausible, but do you have evidence that it’s true?
Then the statement of absolute trust is accounted for by the significant rate of mistakes people make.
Alternatively, you can make that statement as part of a strategy to maximize your expected return on a marriage—if the increase in marriage quality from placing absolute trust in your spouse is greater than the expected cost of being disadvantaged in the divorce negotiaions (if your spouse turns out to be untrustworthy), then you might rationally do it anyways.
Some types of handicap are sexy—but I think this one would probably just make you look stupid. Best to keep it quiet until the other party has already invested plenty of time and effort—and doesn’t flee on the prospect of being forced through unromantic inconveniences.
Even strongly committed muggles put a lot of stock in the customary romantic pieties. “If you think I’m the one, why would you want to sign a prenup?”