Sunday, April 26, 2009
From the Archives: Overview of Relationship Economics
Basically, we want to know who meets whom; after meeting, who dates whom; once dating, who continues to date/get married, etc., and why. We are also interested in understanding when this market may fail – i.e., what prevents potentially good matches from being formed?
To figure this out, one needs to understand some basic features of the social network, understand the sources of relationship productivity, and understand the bargaining process within relationships.
Understanding the social network helps us understand who is likely to meet whom and what information are they likely to have (or to lack) about potential partners.
Relationship productivity is usually referred to as “chemistry”, but it is really productivity. In dating economics one focuses on what makes one pairing of people more productive then another. This is very important because ultimately we will only consider being in relationships with people with whom we can achieve a certain level of satisfaction (or utility).
Finally, dating economics focuses on how the relationship product is allocated through bargaining. (E.g., I will go shopping with you and endure you trying on 27 pairs of jeans in exchange for you not nagging me during the game -- this is massively over simplified, but you get the idea. In reality, most relationship bargaining is not this explicit, but it still goes on.)
Ultimately, two things lead to the end of the relationship: breakdowns in relationship productivity and breakdowns in intra-relationship bargaining. Once an individual no longer believes that they will be better off staying in the relationship versus reentering the market, they leave, and the relationship ends.
The economics of dating is about exploring and understanding the myriad of issues which affect this process.
There are too many varieties in supply so people get confused whom they choose. And sometimes the risk is too big
Couples that do not produce benefits individually or socially (ie- they hate each other) may stay together simply because they've been together for too long, or maybe because they are simply fearful of change. Some may even find themselves pursuing utility minimization knowing that the results will be negative for themselves.
While the most common economic models are based off of things that make fundamental sense (a person won't go through the trouble of creating a firm if they don't plan to succeed ie- maximize utility), something like love involves participants that may do quite the opposite. Perhaps that's why the stereotypes regarding the confusion with "love" exists.
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