Transcript Assist Consumers with Uncertainty - Durham

The Economics of Marriage
The Marriage Market
Market: any mechanism or institution that brings buyers and
sellers together
3 Characteristics to Note: (for marriage market)
1. Not all markets have a fixed location
2. Not all markets involve money
3. Markets assist consumers with uncertainty
No need for fixed location
Not Fixed – e.g. Coffee Shop
Fixed – e.g. Speed Dating
May not Involve Money
• Examples of non-monetary cost include risk, health effects,
time spent, and opportunity lost
• Time and effort form part of the price paid by participants
in the marriage market
One non-monetary reason Mr. Durham does not have a
girlfriend.
• I’m lazy
Assist Consumers with Uncertainty
• Decisions to buy and sell are guided by prices, which reflect
both the value of the good and the cost of providing the
good
• High prices spur producers to make what society wants.
Assist Consumers with Uncertainty
• The selection of a marriage partner contains significant
uncertainty
• Can we determine much about this potential partner?
– What do you think of this man?
Assist Consumers with Uncertainty
• Bad Choice (An extreme example)
• Ted Bundy
– American serial killer
– Killed 30 people
Assist
Consumers with
Uncertainty
• But we aren’t actually screening for
serial killers
– Though we hope they get weeded
out of course
We are looking to find a partner that
can give us the gains from marriage
that we demand
The gains from marriage depend on
offerings that are very uncertain
• Affection
• Parenting skills
• Fidelity
• Ambition
Assist Consumers with Uncertainty
Divorce Rates: would seem to indicate how important it is to get it right
Top 10
Other Notable
71% Belgium
68% Portugal
67% Hungary
66% Czech Republic
61% Spain
60% Luxembourg
58% Estonia
56% Cuba
55% France
53% Lithuania
53% USA
51% Russia
48% Canada
47% UK
43% Australia
22% China
15% Mexico
* Congratulations China
Uncertain Gains From Marriage
Those divorce rates are astounding!
* Clearly there is significant uncertainty with marriage – the above
qualities are difficult to detect.
* Estimation of these uncertain qualities is clearly essential
– So we look to price
The Role of Prices
Point 1: Prices embody information about the value of goods,
and they lead individuals toward optimal choices regarding
resource allocation
– The Price Mechanism
– Profit Maximization should lead to productive efficiency
The Role of Prices
Point 2: A high price indicates that demand for a product is
high, supply is low, or both.
– May have seen this graph before
The Role of Prices
Point 3: High prices reflect interest from informed consumers
and provide a valuable basis for judging quality
Prices and Uncertainty
Key Point: When it is impossible to learn everything about
a product before buying it, price may serve as the best,
and sometimes the only, measure of quality
Marital Income
Marital Income: all of the real world reasons for
getting married, such as:
• Opportunities for laughter and joy
• Home cooked meals
• Children
• Other
Social Price
Social Price: The level of effort and qualities necessary to
successfully court an individual (for marriage purposes).
Question: Which man probably has the higher social price?
Setting the Social Price
• The Supply of an individual is fixed, meaning that the
supply curve is vertical at the quantity available.
• The level of demand determines the price that can be
charged
• Individuals will use knowledge of their own abilities and
potential to set the social prices they expect from potential
partners.
Changes in Social Price
Change in Social Price – an individual’s social price will rise
and fall with
•Their popularity – shift up and to the right of demand curve
•Their relative scarcity
Social Price and Ease of Romance
Social Price and Ease of Romance - social price can be
communicated to another person by:
• The amount of eye contact made
• Receptiveness to dating propositions
• Popularity in social circles
• Interval of time before intimacy