Sunday, April 23, 2006

Price discrimination and dating services

On my last message on dating, Naveen tried to prod me to post more about economic insights on dating. So here is my attempt.

I have used online dating services in the past. For those of you who are unfamiliar, on most of these sites, you can upload a picture and post a description of yourself for free but if you want to send messages to potentials, you have to pay a subscription fee. It turns out, in my experience anyway, many women listed on these sites do not pay the subscription fee. For us guys, on the other hand, in order to fulfill our role as pursuers we have no choice but to pay the fee.

This got me thinking that it would be much more efficient for all of these services to price-discriminate: that is, allow women to become full members for free while charging men. It would cost the site next to nothing to allow women to send messages on the system. Additionally, the more active women there are on the site, the more valuable it is to men to become paying members -- and the more a dating site could potentially charge men. In economics jargon, more women create what is called a positive network externality.

For women, on the other hand, they may be much better off belonging to a site where men have to pay to become full members. Paying the subscription fee is what economists call a signaling mechanism. It shows you are someone with at least some disposable income, you are established enough to have a credit card and that you attach some value to starting a relationship. Less diplomatically, it helps weed out shady and disreputable characters.

Finally, I should point out that there is at least one dating site that has thrown politically correct caution to the wind and does exactly this. I just saw an ad for it yesterday hence the inspiration for this post: it is called Mate1. Moreover, the same logic explains why some bars and clubs offer discounts or free entry to women.

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