Dating Lemons
Why is it so hard to find a match?
This week is part 1 of 3 dating apps videos (we will put them out over the next couple of months) we plan on doing–
The impetus for the series comes from conversations I’ve had with a new colleague, Jess. She was wondering why it’s so hard to find a normal guy on dating apps. Markets with quality issues often suffer from asymmetric information—so this first video is built around discussing asymmetric information, its associated problem (adverse selection), and a potential solution (signaling).
Notes
Most online matching platforms (like Upwork, Uber, or eBay) rely on two-sided ratings to solve the asymmetric information problem. Both the seller and the user can rate each other. In general, this works well—but for obvious reasons, this type of system would never fly in dating. Do you really want to rely on your exes for ratings? “Yes, I’m dumping you, but please leave me a five-star review.”
Without a reliable review system, asymmetric information wreaks havoc on dating apps. Some apps have tried verifying user claims (asking for selfies or employment history), but the practice isn’t yet widespread. This appears to be a case of misaligned incentives. You’d think it would be in the apps’ interest to verify claims, but they make money from the time users spend on the app—so if users have to search and search, that might actually be good for them. This seems to be the best explanation I could find for why dating apps don’t handle the asymmetric information problem themselves.
I have a friend-of-a-friend who supposedly met his wife on a super-exclusive app for the ultra-wealthy. Since he’s a friend-of-a-friend, I was unable to verify the story or get the app’s name—but a cursory Google search turns up dating sites reserved for the wealthy (The League, Tawkify). So maybe the rich have solved the asymmetric information problem by creating a separate invite-only market.
MRU’s video is the best summary of the Lemon Problem out there.
George Akerlof, the economist famous for the “Lemons” paper, did well on the dating market. His wife is former treasury secretary and former Fed chair: Janet Yellen