Wednesday, February 13, 2008

An Economist's take on online dating

I had been out of the dating market long enough to have had comfortably forgotten about its time-consuming hit-and-misses and its exasperating “market failures.” But months now into Singlesdom, and with Valentine’s day promising yet another consolation box of chocolates by Mother, I said “Time for action!”

I have always been skeptical of online dating, for the simple reason that the whole concept reminds me of an IKEA catalog. But in light of my self-imposed urgency, I recently decided to conduct a little “field research” to see whether the World Wide Web can provide solutions to the failures of the dating market in the real world.

Now, let me clarify… I’m not talking about “failures” of the type: “Spending two years of your life with someone as emotionally deep as a sack of potatoes.” I mean, c’est la vie! It’s “market failures” I’m talking about. But what are these?

On Dates and dates: Think of the market of “Dates” (as in “hot guys and chicks”) similarly to the market of any commodity—say “dates” (as in “dry fruit”). There is supply, demand and a clearing price. Now, by virtue of my single-female status, I will focus here on male Dates and female prospectors, but I promise you the terms are interchangeable.

So let’s say you’re a single, 30+ male professional, 5’ 9’’, a few extra pounds, occasional back pains, middle-of-the-road, Yankees fan, etc etc; and you walk into a party full of women. Suddenly, heads are turning, hormones rising, females compete for your attention; you’re a hot commodity! Put plainly, your “price” has risen.

More generally, you can think of the price of a Date as the amount of effort needed to catch him. The latter includes anything from make-up, high heels, cleavage and botox to painful hours on the treadmill, training in courtship and table manners, even some college education.

The perfect world: Now transport yourself to an economist’s perfect world: The world of perfect competition! It’s beautiful world with many delightful features, of which I will mention three: First, there is “free entry” and exit. Remember that party a short while ago? Well, my friend, you no longer can enjoy a monopoly. The party is open and any Date can come in, check out the market, play, flirt, eat, shoot and leave.

This brings us to a second feature of this beautiful world: Dates have no market power. They can’t set their own price. So you, the 30+ male with the few extra pounds at that party can’t really tell me “Show me more cleavage or I won’t talk to you” because, sorry, that guy behind you (also 30+ with a few extra pounds) seems to be eyeing happily the 7 inches I’ve already revealed.

Critically, this is a world where information is complete and almost perfect. All females at the party know the rules of the game—what you’re up to, how you respond to fishnet stockings, etc. They also know what each and every male guest will want in exchange for a party chat. And they can figure out more or less what you’re worth: Incipient streaks of white hair, a hint of flab around the waist, a couple of witty chat-up lines and that Yankees logo on your hat.

The outcome of all this is a world where everyone finds their perfect match at the lowest price feasible. Markets clear and we all live happily ever after!

In your dreams… Economists will privately confess that perfect competition does not exist in the real world. Like most markets, dating is fraught with “market failures.” Entry is not free, some players have market power and information is far from complete, let alone perfect. But what about the cyber world?

Granted, online dating is a leap forward towards achieving free entry. Anyone can walk in, put up a profile and express themselves at the cost of 20 bucks a month—hardly a barrier to entry. It also goes a long way towards reducing the market power of a city’s boisterous socialites, who dominate the party scene leaving little room for a low-key newcomer from, say, Wichita, KS. I mean, this Wichita guy could be my soulmate but, with no way of meeting him, I keep wasting my energy in trying to crash the Oscars, 3,000 miles west, so that I can finally meet Matt Damon!

The known unknown: But what about improving the information problem? Sure, with just one click I can find out your height, body type, profession and annual gross—let’s say with 70% probability it’s true. Scroll down and I now have a hint of whether you’re a family guy, a pet lover, a sushi aficionado or a chain smoker. But that’s pretty much what I would have found out about you after a ten-minute chat at that Same info, yet no high heels, no martinis, no frisson; rather, a lackluster Monday night in front of a computer screen. Hmmm.. you pick!

More fundamentally, online dating goes nowhere near addressing the lack of (what economists call) “excludability” in the dating market: That’s your limited ability to stop your Date from succumbing to other prospectors. Sure, that’s what makes Dates far more fun and challenging than… dates! But it’s a problem in so far as it stops potentially beneficial “trades” from happening because of a mutual lack of trust, a lack of signals.

If anything, online dating makes this worse: Why should I bother with a second “wink” when I see you—you who sent me that syrupy email the other day—online, most likely copying and pasting that same syrupy comment to the woman three entries below me? And by the way, is there anyone out there who thinks that winks are NOT utterly lame?

So I remained unconvinced. And after my brief free-trial period, I’m going back to Mother’s good-old courting techniques.. high heels, table manners and all. Besides, Matt Damon is waiting for me... though he doesn’t even know it! Yes, it’s an imperfect world…

Glossary: Perfect competition, free entry, market power, market failure, excludability, Wichita KS, Matt Damon.


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praxis22 said...

The FT have been thinking the same thing:

I hope you find what you're looking for, but I can recommend getting to know the brain before the bod, I met my wife that way :)

Anonymous said...

Nice Valentine's Day column, Chevelle!

I think your conclusion is somewhat more romantic (rather than seeing your ad and winking, the person saw you across the room - at least there might be eye contact!), but I'm not sure it works from the economics perspective. Not that it should, by the way, because I don't think anyone really wants to reduce love to merely an economic transaction!

Anonymous said...

Deanna, this might be the stupidest advice I have ever heard! For someone with no money to spend the fruits of what little credit they might be able to muster to buy a car as a status symbol and keep it in front of their home? A status symbol that loses 25% of its value the day it is purchased and then continues to depreciate while, in your formulation, not even being used! Chevelle, I don't know where you get these people!

Anonymous said...

Nice one Chev, I like your approach! I disagree though in that I don't see winking as lame. I've been a fan of "poking" (see Facebook) and I've managed to close a few "trades" this way.. And one does have to "wink" to the woman "three entries below" as a means of "hedging mechanism", in case the first "trade" defaults and unfortunately there's no Clearing House in the Dates market. As for the trade price itself, because of the "party, shoot and leave" way that Dates work, it seems to be unpredictable, following Brownian-motion (i.e. future independent of past).. Perhaps there's some truth in "women (and men occasionally, I'd add) don't know what they want and they won't be happy until they have it".. ;-)

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