Finance and economics: Free exchange Optimising romance
To find true love, it helps to understand the economic principles underpinning the search.
DATING is a treacherous business.
There may be plenty of fish in the sea, yet many are unhygienic, self-absorbed, disconcertingly attached to ex-fish, or fans of Donald Trump.Digital dating sites, including a growing array of matchmaking apps, are meant to help.Their design owes more to hard-nosed economics than it does to the mysteries of the heart.In a sense, searching for a mate is not so different from hunting for a job.Jobs, like prospective partners, have their strengths and weaknesses, which makes finding the right one a matter of complicated trade-offs.
Such exchanges are different from other transactions, in that both parties must be enthusiastic about the match for it to happen.A supermarket, in contrast, does not particularly care whose wallet it is draining, nor does the power company agonise about whether a customer is worthy of its watts.Alvin Roth, who won a Nobel prize in economics for his work on market design, made a career of studying such “matching markets”, where supply and demand are not balanced by price.Instead, people transact based on information.An apple-seller can nudge down his prices until the whole cart is sold.Yet if Apple were looking to hire two workers, it would not set a salary so puny that only two people applied.
The quality of new hires often matters at least as much as their salaries.Mr Roth, who won the prize jointly with Lloyd Shapley in 2012, found that the structure of matching markets made a significant difference in determining who wound up with whom.Systems designed to elicit people's true preferences generated better matches between hospitals and doctors, for example.But the entire medical profession has an interest in improving matches, and so can set up a national clearing house to do just that.The lovelorn must instead rely on an array of digital matchmakers.
Good matches depend on good information.Even without digital help, people usually have some inkling of how much they have in common.Cosmopolitan strivers move to New York, say, rather than sleepier cities, in part because they will meet other ambitious types with similar interests.Within New York, the places people choose to spend their time—whether Yankee Stadium or a yoga studio—determine which sorts of people they come into contact with.Because it is expensive to live in New York, and to spend time sweating in a yoga studio or swearing in the stands, people in such settings can be reasonably confident those around them are in some sense like-minded.
But one critical bit of information is missing: whether there is mutual interest.The act of asking someone out is fraught.In the non-digital world, approaching a potential partner brings the risk of awkwardness or humiliation.Digital dating reduces this cost dramatically.Apps like Tinder and Happn, for example, reveal that a user likes another only when the feeling is mutual.