Marriage, surprisingly, has an analytic solution. Economists have devised a “deferred acceptance” theory that applies to marriage, and have won a Nobel prize for it. Game theory suggests that to be happy, one must be prepared to be lonely 37% of the time. On a bus ride in the Tieguanyin tea plantations of Taipei, fueled by caffeine and a high altitude, I wondered whether economics can explain why dating is so difficult. Emotional irrationalities aside, it seems like dating in the modern era is more difficult because of transparency – the incalculable struggle of deciding when to become “Facebook official,” or whether to post a particular display picture. This might seem obvious enough, but the following will hopefully justify why this is indeed the case. In short, our current environment accepts fewer couples than the socially optimal quantity.
Deciding whether or not to date someone should be a simple enough task. Like in any decision, the benefits should outweigh the costs. In other words, the marginal benefit of dating the next girl should outweigh the costs of doing so. Although there are few if any real costs of dating, there is clearly opportunity cost: missing an opportunity to date someone better or sacrificing career opportunities. The socially optimal quantity for any individual is to date every girl whose marginal benefit, i.e. the utility derived from dating said girl, is greater than the opportunity costs. However, this socially optimal point is rarely reached. Perhaps that is why people find dating so difficult.
As in most markets, the marginal benefit curve is downward sloping. If you could only date one girl, you would choose your favorite – the one that provides the most utility to you. The next girl you date will provide slightly lower utility. In this way, you may visualize dating with a downward sloping demand curve. As we rush into our twenties, most with little interest in settling down anytime soon, this demand curve can be viewed as how many girlfriends or boyfriends we have over a certain period of time (maybe 5 years). Indeed, this is exactly what a demand curve is.
In order for a socially optimal point to be reached, the marginal revenue curve must be equal to the demand curve. This only happens when there is first-degree price discrimination. The analogue in the world of dating is each date you find does not affect the quality of other dates. In actuality, this is rarely the case. In the world where appearances are everything, choosing to date one girl might exclude you from dating another girl. This is the problem a monopolist faces. In a one-price monopoly, lowering the price for one customer means lowering it for everyone else – the explanation why marginal revenue is always below demand. Similarly, choosing to date a girl that you are perfectly happy with dating, but just passes the bar, might exclude you from dating a girl you would otherwise be happier with – because of social reasons and signaling theory.
So how do we move ourselves so we are closer to the socially optimal amount? First-degree price discrimination is difficult to perform. However, there may be an opportunity to perform third-degree price discrimination. In the dating world, we will find ourselves facing groups of people will differing elasticities. In laymen’s terms, some will like us more than others. For 3rd degree price discrimination to work, these groups must be identifiable and separable. A good example, as evidenced by a close friend, is an Asian church-going group that is shielded from Facebook, and mostly-white friends of friends from Queen’s. These groups will have different elasticities and more importantly dating people from one group will not exclude you from dating people from another group (i.e. “non-transferable”).
Segmenting potential candidates into these groups and ensuring some Chinese wall between them will move dating to a more socially optimal quantity. Interestingly, this response has already happened. It appears like many relationships are moving in the direction of limbo – not just passerbys but no labels either. That helps keep relationships unofficial and therefore out of the dinner conversations (or the Alehouse bar, if you will). Couples are getting better at keeping relationships to themselves, though sometimes the housemates get drunk and spill the beans, and still other times a scrupulous, troublemaking detective becomes gossip Queen. Perhaps this is an economic justification to engage in “double-dealing”, though certainly not in the traditional sense of the word.