Online Dating and Search Costs

So, what is it about online dating that is sometimes controversial or awkward? Well, I don't know. But sometimes one thinks about online dating as something associated with people for whom is difficult to find a partner through "conventional" methods. And this is sometimes associated with people who is ugly or non-friendly or any combination of both. I will try in this post to convince you that this perception of online dating can be explained through economic theory.

The economic concept of "search costs" relates to the cost of transaction for buying a good. From my loyal source Wikipedia we have that "Rational consumers will continue to search for a better product or service until the marginal cost of searching exceeds the marginal benefit".

Well, dating - or looking for a partner - has an associated search costs with it. You may think about it as the time you have to invest in going to places where there are people you could date, or investing the energy in thinking in strategies to approach the other person, or even you could think about the drinks and food you'll have to pay in dating until you find the person that you are looking for. All this involves time and money. These are "search costs".

However, we should think in this case - as opposed of the search cost associated with the "good" you want to consume - as a cost that it is associated to the consumer: the person that is looking for a partner. We could assume that search costs are the same for each individual (independently on which girl/boy he or she is searching for), but search costs are not the same across individuals. For instance, Pablito (a fictitious name) always has a hard time trying to invite a girl out - independently of which girl - he is very shy and he is not that handsome. So his search costs are constant. He has to ask 20 girls to go out with 1. He has high search costs. However, Juancito, is very handsome. He doesn't even need to ask a girl out - because they come after him. His search costs are very low.

So the assumption for my "model" is that search costs are a function of your characteristics that are relevant for dating (how good looking and friendly you are, how funny you are, etc).

At this point, let me bring another ingredient. Online shopping (not dating!). What is the good thing about online shopping? Well, it decreases the search costs for each good. If you wanted to buy a computer in the early 90s, you had to go to 5 stores, and spend some time in each one, probably buy some magazines, in order to decide which is the best computer for you. The time and money you spent in doing all this - before you buy the computer - are search costs. So now, Google shopping and Amazon.com do all this for you. Also, online product reviews from buyers also help you with all this. You can fairly do all the 2-weeks research you would have done in the 90s for buying a computer in roughly one day through the internet. Search costs has been reduced sharply.

So, online dating is the same concept. What online dating is doing is that is reducing at some extent the search costs of people who want to date. Why? Well, you go into a website in which everybody else is looking the same as you, and you have all the "options" so that you can "see what suits you better" in only one place. You don't have to go to 10 parties, and 5 social events in two weeks to see if you find one single person that is willing to date you. The search costs has been reduced.

So now, what is left is to understand who has the incentive then to do online dating. Clearly, people who want to reduce their search costs. It can be people who are less likely to find someone to date in their day to day life at the moment. But here I will add other components that affect the outcome of your search costs. Before I only included phisical characteristics and how friendly and nice you are. But there is information involved as well. People who lack of information on where to find other single people with the same interests also have search costs, either because they are new in town, or they are no longer in an enviroment where it is likely to meet new people every day (such as in college or graduate school). These are the people that are likely to join online dating.

People who have already low search cost don't have too much of an incentive to join such a network. Going back to the definition at the top of the post, their marginal cost (the membership fee) exceeds the marginal benefit that they can get from online dating. But it doesn't mean that "pretty" people will not join. Maybe "pretty" people are having a hard time looking for an specific kind of person that they are not able to find in their local environment.

So it might be that in the future, as almost everybody in developed countries have bought at least something over the internet, maybe more and more people will say that they have dated at least one person thanks to the internet. We'll see...