· Everything I Ever Needed to Know about Economics I Learned from Online Dating is about conquering the dating market—from an economist’s point of view. blogger.com and the men listed ‘separated’ By the time I joined blogger.com, I was divorced in every way except the legal one. So, when I posted a profile on blogger.com, I listed [ ] · Everything you always wanted to know about the economics of dating sites (but were afraid to ask) September 2, pm EDT. One in three Author: François Lévêque Economics of Online Dating: Biggest Market. The basic principle is to go to the biggest market as possible. If you want to limit what you’re looking for, try to do it in ways where there’s a still a very big pool of those types of people. Limiting yourself to Christians and South Asians is okay. Economics of Online Dating: LimitationsEstimated Reading Time: 4 mins
Everything you always wanted to know about the economics of dating sites (but were afraid to ask)
Image Paul Oyer Amy Harrity. When I set up my dating profile, I was upfront about my teenage children and my sweet but impish golden retriever. com where they ask some very personal questions, I checked a few boxes that were not technically accurate. I admit it. I left out details — and lied. What led me to be honest on some parts of my profile and not others? We can find the answer in a branch of game theory known as cheap talk.
A cheap talk framework considers the potential conflict between my preferences and those of the women I am trying to attract and lets us analyze, in a given situation, when and if it is sensible to hide information or lie outright. Since what was true and what I thought would appeal to people were all i ever know about economics online dating the same, I could quickly fill in most answers.
But sometimes there was a conflict between an honest answer and what I thought would make me attractive. Game theory would say it all came down to utility: the degree to which I was forthcoming depended on what I thought the people were looking for, as well as the probable cost to me of lying about myself.
As much as we would all love to be loved for the people we are, things are more complicated. A woman and I can find each other attractive, but at the same time, she finds my favorite Internet video extremely unfunny, or feels she could never go out with anyone who checked a certain box regarding politics. If I revealed my video and views, that woman would never agree to meet me in the first place.
So I, all i ever know about economics online dating, like many others, hide these minutiae. Research shows that minor lying is prevalent on dating sites, with a typical all i ever know about economics online dating claiming to be an inch taller, about 5 pounds lighter, and a year or two younger.
Unfortunately, profile inflators have a major impact on those of us who would like to tell the truth. Their lies lead all of us to discount claims as cheap talk. But I prominently displayed two features on my profile — my teenage children and the big, friendly dog that is not so familiar with the concepts of personal space and hygiene — that would be big turnoffs to many people. When it comes to children and dogs, my interests need to be perfectly aligned with those of potential partners.
This is key to cheap talk models: The cooperative side suggests that the more genuinely aligned the interests of the provider and consumer of information, the more accurate the information will be. Lying — the noncooperative part of game theory — occurs far more often with baseline data we all share, like looks, income and age, where everyone wants to seem as attractive as possible.
But not everybody has teenagers or a hairy canine sidekick, which are non-negotiable. The logic that drives our online profiles also leads companies and their top managers to stretch the truth. One example was documented by Dartmouth economists Jonathan Zinman and Eric Zitzewitz, who found that ski resorts exaggerate their snowfall, especially during periods generally weekends when they have more to gain by doing so.
But just as Internet daters will exaggerate less if they think they will get caught, ski resorts tell the truth more when skiers can catch their lies.
The proliferation of smartphones has made it possible to question snow reports in real time. One SkiReport. More like 0. Corporate cheap talk is so common it extends all the way to top executives. But sophisticated shareholders are a lot like skeptical Internet daters, all i ever know about economics online dating. The CEO, knowing the market will discount what she says, really has no choice but to inflate expectations.
Similarly, stock analysts have also been widely identified as potential providers of cheap talk. By convention and SEC rules, the people who do these analyses are supposed to be isolated from people at the bank who handle the stock offering.
Hsiou-wei Lin and Maureen McNichols studied in detail the recommendations of investment bank analysts at the time of new stock offerings. Lin and McNichols showed that independent analysts were considerably all i ever know about economics online dating generous with their forecasts than analysts whose bank had a relationship with a company, all i ever know about economics online dating.
As we would expect, however, the market assumes this exaggeration. As a result, the stock market is less responsive to the recommendations made by an analyst whose bank has an underwriting relationship with the company he analyzes relative to those made by a truly independent analyst. In addition to hanging on the words of analysts and CEOs, the stock market waits breathlessly for statements by one person in particular — the chairman of the Federal Reserve.
Statements by the All i ever know about economics online dating chairman have the potential to be cheap talk. The Fed can always say he or she plans to take certain actions regarding interest rates just to try to calm the markets, or that things look better than they do. But the Fed is often somewhat cagey about its intentions, providing ranges — rather than exact numbers — for certain financial targets. He found that if the Fed announced a precise target, such as that the inflation rate should be 2 percent, there might be situations in which it made this announcement when its true goal was 4 percent inflation.
There is less scope for manipulation when announcing a target range, such as 1 percent to 3 percent inflation. So cheap talk is more believable when a range is provided than when someone pins himself down with an exact figure. Perhaps, then, I should update my online profile to say that I am between 45 and 55 years old and between 5 feet 8 inches and 6 feet 2 inches tall.
So, how can you overcome cheap talk? An online dating site in Korea tried to find out. The site, essentially the Korean equivalent of Match. com, ran a special event: Over a five-day proposal period, all i ever know about economics online dating, participants browsed online profiles as in standard online dating, but could show only up to 10 people that they were interested in a date.
In addition, some participants could offer a virtual rose along with two of their date requests. Next, there was a four-day period during which people responded essentially yes or no to the proposals they received.
The company then matched up the mutually interested pairs. Why did the site add the element of the virtual rose, and did it affect the outcomes of the dating arrangements? The answers are that a couple of economists talked them into it, and, yes, it had large effects. The idea of signaling something to someone you are trying to impress was modeled by Michael Spence in the early s and won a Nobel Prize inand these economists wanted to try it out. But note that what makes the signal work in this case is that it costs something.
Participants who use the virtual rose have to give up something very important — the ability to show special interest in others. Signals become meaningful only if they are costly. When Michael Spence originally explained signaling, online dating had not yet been invented and he had to think of another venue for his idea. He imagined a world where colleges exist only so that prospective employers can figure out whom they want to hire.
In the model, there are exactly two types of people — those who are talented and those who are innately unskilled. But suppose that only the talented people will be able to graduate from college. They may learn nothing useful, but they all i ever know about economics online dating employers that they are talented and, as a result, they are eligible for higher-level jobs.
In this model, education has solved our cheap talk problem. A potential employee puts his money where his mouth is by spending a lot of time and money on his education to prove rather than just say that he is talented.
As the Korean dating site results showed, the signaling idea applies quite nicely to the virtual rose. If a man or woman sent a standard proposal, the recipient accepted about 15 percent of the time. But about 18 percent of proposals all i ever know about economics online dating came with a virtual rose were accepted, which means sending a rose increased the chances of acceptance by about one-fifth.
Looking at who accepted which proposals provides more evidence for the credibility of virtual rose proposals. Tracking height, earnings, education and other characteristics, the company that runs the dating site can determine which participants will be viewed as more or less desirable. The virtual roses do not matter that much for the most desirable people. But the effect of a virtual rose is largest on the middle desirability group.
They are almost twice as likely to accept a proposal with a rose than one without. To them, being told in a credible manner that they really are particularly attractive is very meaningful. They have heard a lot of cheap talk in their lives, and they value someone backing it up. Or, put another way, the rose is a meaningful investment in the person because the sender had to give up other opportunities in order to send it.
These are effective ways to signal that you really mean what you say. Adapted from Everything I Ever Needed to Know About Economics I Learned From Online Dating Harvard Business Review Press.
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· Economic analysis once framed a theory to explain marriage, but the boom in dating sites has baffled many econometricians. Before looking at how Author: François Lévêque · Everything you always wanted to know about the economics of dating sites (but were afraid to ask) September 2, pm EDT. One in three Author: François Lévêque Economics of Online Dating: Biggest Market. The basic principle is to go to the biggest market as possible. If you want to limit what you’re looking for, try to do it in ways where there’s a still a very big pool of those types of people. Limiting yourself to Christians and South Asians is okay. Economics of Online Dating: LimitationsEstimated Reading Time: 4 mins
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