Sunday, April 26, 2009

From the Archives: Overview of Relationship Economics

The economics of dating focuses on a few key questions:

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.

In the economics of dating, there is also demand and supply as same as other economics. But there are lots of varieties and deffrenciated goods(?) in the market. These are the human, we do not know exactly who they are and what they want in labor market. If the purpose of dating is defferent, the market may fail.
There are too many varieties in supply so people get confused whom they choose. And sometimes the risk is too big
I found this approach to looking at dating to be very entertaining and makes a lot of sense after breaking it down. Looking at the dating market as a given amount of supply and particular person having some form of demand fits any other economic approach to looking at a given situation. Although this way of looking at dating and relationships is very bland, this is a good representation of the dating world in a form that can be analyzed. The equation or combination of graphs that would be able to explain all aspects of a relationship and dating would have to very extensive because of all the different variables that arise when dealing with human decisions, especially when dealing with a human decision that has so much emotion surrounding it. Although there are a great amount of variables that would have to be considered when looking at a relationship from an economist’s angle, I believe that humans are simplistic enough to be analyzed in this fashion.
Re: any intimate human interaction, it seems like any assumption that the participants will logically attempt to make decisions that will maximize their utility in the face of perfect information can be illogical in and of itself. While it seems stereotypical to address the inexplicability of "love", some relationships , at their core, make little sense.
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.
Relationship economics is something I found to be very interesting. When I enter a relationship I take a lot into consideration. The first being is this something I actually am going to like and enjoy (Utility). Most of the time I get bored very easy with someone I am dating and eventually break it off. I have a feeling in the dating market that the supply and demand is rarely in equilibrium especially in college. I feel like more girls in college are looking for a relationship while most guys are looking for something a little more short term. So the demand for relationships is more then the supply. There are a lot of variable that go into the decision to enter a relationship and i feel like they are different for everyone.
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