Coase Theorem, The Prisoner’s Dilemma, and Zero-Sum Games in Modern Dating

Learn from these economic theories applied to modern romance to be a better person.

The modern dating world is different than the one in which our parents grew up. Most people no longer date, marry, and build a life with their high school sweetheart. Instead, young adults pursue higher education, careers, and empowerment, whatever that may be. For the first time in history, we are marrying later on average than ever before. Men are now getting married at 30 and women are getting married at 27.

Technology has completely transcended the marketplace for dating.

The dating scene is transforming to reflect the later age at which people get married. Asking a girl out on a date and being nervous to approach her after work or class is no longer the social norm. Now, the catalyst of most dates for a young professional is the direct result of a phone app.

Technology has completely transcended the marketplace for dating. Now, in the palm of your hand, you have access to almost any individual with a smartphone within a 60-mile radius. Traditionally, the set of people a young, eligible gentleman or lady would date from consisted of classmates, coworkers, family friends, and, occasionally, someone they actually met by happenstance in the street.

Coase Theorem

Some might argue from a probabilistic standpoint that access to more people than ever before is wonderful because of the law of large numbers. You are more likely than ever before to find someone you are compatible with because of the large digital dating pool of people that now exists. Also, technology facilitates communication with more people than ever before.

Your dream “one” can be found out of the entire pool of the population, and you can instantly contact your future “bae.”

This can be viewed economically as reducing asymmetric information and trade barriers with regard to the variety of partners that are out there. You no longer have to imagine your dream “spouse” and wonder if you’ll spend your entire life searching for “the one.” Now, with the use of filters and a relational database, your dream “one” can be found out of the entire pool of the population, and you can instantly contact your future “bae.”

Going beyond basic probability and reduced trade barriers, Coase Theorem can also arguably be applied to modern romance. Coase Theorem states that in the presence of externalities, if there are low transaction costs and free trade, then bargaining will lead to a Pareto efficient outcome regardless of initial ownership or, in our case, relationship statuses. In layman’s terms, this means that even if someone else has your “dream date” or you have the wrong date at the moment, you will end up with the right person in the long run.

Ending up with the right person or the person who you value the most and who values you the most is the direct result of Pareto efficiency and Coase Theorem. Both of these economic concepts can be carried out now because of technology and the reduced transaction costs to learn of other potential partners.

Unfortunately, in modern romance, not every person has the same experience as our “Coasean” and “Pareto” efficient daters. Some people experience the new negative and unintended consequences of dating with technology.

People stay in the marketplace permanently because the bundles of options are infinite.

The first we will look at is infamously known as “FOMO,” or fear of missing out. In today’s dating marketplace, people are constantly entering and exiting the market, and the dating supply of people changes rapidly. Young people today have more consumer choice than our parents’ generation had in dating bundles. The indifference curve is no longer a finite convex line because technology has made the dating pool so large that it extends in every direction.

There are infinite combinations of people to date. The infinite combinations of potential partners lead to decision fatigue for many consumers. Many people do not enter into a committed relationship because of decision fatigue, and many people do not have an indifference curve of preferential dating options because the dating pool has expanded so much to the point that the curve doesn’t exist. People stay in the marketplace permanently because the bundles of options are infinite. Who wants to leave the market if they don’t have the best partner for themselves?

Prisoners Dilemma

The prisoner’s dilemma is the most unfortunate consequence of modern romance and technology. Non-cooperative games, or dating where you do not know the other person’s intentions and strategy, have always been present in society, but now more than ever before, the prisoner’s dilemma dominates the dating scene.

The prisoner’s dilemma is where two rational individuals don’t cooperate with each other to achieve the optimal outcome—in our case, a solid relationship—because of asymmetric information, even though it is in their best interest to do so. In modern romance, with the evolution of phones, technology, and apps, many people don’t want to be the first person to exit the dating market because of fear of the other person not exiting the dating market, either. Additionally, many people don’t know the intentions of the other person in the dating game.

If this were a fairy tale, then the rest of the story would look like they exchanged numbers, started dating, and lived happily ever after.

Let’s start with the anecdote of when Harry met Sally. Sally was liking pictures on a dating app when she came across Harry’s profile. Harry’s blue eyes, straight-forward haircut, and his dedication to his current position as a recent law school graduate immediately caught Sally’s attention. Sally then liked his profile, and a few days later, Harry liked Sally’s profile back. Harry loved how Sally loved economics and mathematics, and he found her authentic, unfiltered commentary amazing. If this were a fairy tale, then the rest of the story would look like they exchanged numbers, started dating, and lived happily ever after. Most stories like the aforementioned do not play out like a fairy tale.

Instead, because of asymmetric information and the prisoner’s dilemma, the actual play-by-play of modern romance is as follows: Harry texts Sally to ask her on a date. They go on a first date that is really historically unconventional but very much the norm in modern times. The date includes pizza, Netflix, and a lot of authentic conversation—but hey, we aren’t our parents’ generation, and dinner and a movie out is just not the norm anymore.

The next step is that Harry texts Sally two days after their first date at 8 PM. He waits two days because he doesn’t want to seem too eager and scare Sally away. Sally spends those two days wondering why Harry hasn’t contacted her, and she begins to wonder if he had a good time. After those two days, Sally receives a text from Harry, and she is relieved that he texted her, but she now doesn’t want to respond for another two days because she also doesn’t want to be overly eager to contact Harry since it took him two days to respond.

They don’t have a dominant strategy to play with each other because they do not know how the other person feels.

Both Harry and Sally had a wonderful time on their date, but with modern technology, asymmetric information, and the prisoner’s dilemma, we see a breakdown of communication. We see that both Harry and Sally want to text each other and go on another date, but instead, the asymmetric information and the lack of cooperation in the game result in the prisoner’s dilemma. Instead of being straightforward and communicating punctually and politely, both Harry and Sally feel like they can’t openly communicate because of the asymmetric information about the other person. They don’t have a dominant strategy to play with each other because they do not know how the other person feels.

The best strategy would be for both parties to openly communicate how they feel about dating. Dating transparently leads to the best outcome. However, dating someone in the early stages is an asymmetric non-cooperative game where the lack of knowledge of the other person’s intentions can lead to both people playing a more conservative strategy.

Either Harry and Sally can continue their individual strategies where there is a barrier between the exchange of communication between the two parties, staying in a Nash equilibrium, or they can agree to a bilateral contract exchange of information. Ultimately, over time, a bilateral contract exchange of information between two parties dating would optimally lead to a Pareto efficient outcome for both parties involved and not to a prisoner’s dilemma stuck in a Nash equilibrium.

Zero-Sum Game

Learn from these economic theories applied to modern romance to be a better person.

The term zero-sum game in economics is where each participant’s gains and losses end up being equal to zero and canceling each other out. A zero-sum game can be applied to dating and applied to the prisoner’s dilemma between Harry and Sally. Both Harry and Sally like each other a lot and could potentially be good together. However, in many cases, modern dating is a zero-sum game because both people lose and gain things throughout dating, but they ultimately end up alone again because of the negative unintended consequences of modern romance such as FOMO, decision fatigue, a skewed indifference curve, asymmetric information, and the prisoner’s dilemma.

Learn from these economic theories applied to modern romance to be a better person and to hopefully one day fall in love and not lose the potential love of your life to asymmetric information or a non-cooperative prisoner’s dilemma. Instead, I challenge you to date authentically, be honest, and wear your heart on your sleeve. It’s up to our generation to transform modern romance and not let game theory rule our lives.

Further Reading

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