Imperfect Competition and the Paradox of Choice

Is being a single girl in places like the East Coast as awesome as movies like The Nanny Diaries and Legally Blonde make it seem? Do YSA versions of guys like "Harvard Hottie" and Emmett abound in the wards between between Cambridge and Arlington?
A few weeks ago, I explored the extent to which competitive dating markets exist, arguing that Provo, Utah is a relatively good example of one. In my analysis, I acknowledged that no dating market is likely to be perfectly competitive, but I failed to give a good example of imperfect competition (e.g., monopoly or monopsony). Recently, however, one of my friends suggested that individuals in certain markets outside of the Happy Valley may face less competitive conditions.

According to my friend, in just about every singles ward on the East Coast (including Boston, NYC, and D.C.), there are 2x as many girls as guys. For a guy on the prowl, a place like BYU might seem ideal because of the quantity of girls. However, the valuation of a guy tends to increase on the East Coast since there is a lesser supply of LDS males on an absolute and relative basis. Put differently, an East Coast bachelor may possess more market power relative to a BYU bachelor and can therefore demand higher quality in the women he chooses to date.

That's great for guys, but what does this mean for all the single ladies on the East Coast? For a good chunk of my college years, I fantasized about moving to the East Coast and working on Wall Street. Although I ended up getting my dream job in Phoenix and not Manhattan, there is at least one compelling reason I wouldn't mind living back East--even if it would put me in a seemingly unfavorable bargaining position as as single LDS female.


This book is still on my need-to-read list, but I've heard great reviews about The Paradox of Choice by Barry Schwartz, a prominent American psychologist. Although economists generally assume that more options is better than fewer options, Schwartz suggests that too many options can lead to confusion and frustration for the chooser. In some ways, being in an exclusive relationship is "costly" in Provo since there are many good dating options. Sure, it may be easy for Molly Mormon to enter into a dating relationship with FHE Fred, but while she thinks about dating Fred, she also has to consider whether it would be more beneficial to date Chem 101 Chris, Laundry Room Landon, Friend-of-friend Frank, Smith Fieldhouse Sam, etc. etc. etc. In other words, too many options can be overwhelming.

For this reason, I sometimes wonder if living in smaller (but not totally dry) dating markets in places like D.C. or Boston may actually reduce choice paralysis, making it easier for individuals to settle into longer relationships without worrying about "missing out" on other dating options. Anecdotally, I know that I personally go on many more dates when I'm up at the Y, but it seems that some of my longer relationships have actually occurred while living in non-Utah markets. That said, I've never been a YSA on the East Coast, so I'm sure my hypothesis is a bit simplistic. (Also, I've heard complaints from big city girls that, although the mix of guys in East Coast wards may be disproportionately weighted toward smart, ambitious, "desirable" types of guys, including financiers, lawyers, and academics, those guys are often "too invested" in their careers and may have limited time resources to expend on dating activities. . . . ) Nevertheless, I think that the Paradox of Choice may at least partially explain why living in an imperfectly competitive dating market is not necessarily a bad thing--even if the premises of The Nanny Diaries and Legally Blonde are mostly fiction.

Don't Let Economists Spoil Your Thanksgiving Dinner

My mom has a wonderful book called Rules of Thumb. It contains 129 pages of random facts, such as the following: "As a rule of thumb, one ostrich egg will serve 24 people for brunch," and "A submarine will move through the water most efficiently if it is 10 to 13 times as long as it is wide."

My favorite rule of thumb appears on the cover of the book (clearly the author thought it important enough to showcase).

"Up to 25 percent of the guests at a university dinner party can come from the economics department without spoiling the conversation."

Something to keep in mind during Thanksgiving dinner tomorrow. One of my friends from school might be in a bit of trouble with this one since he, his dad, and at least two of his brothers are economists. My dinner party should be fine though. The one other econ major in my family decided to stay in Utah for Thanksgiving this year, and my parents can always banish me to the kids' table if I start monopolizing the conversation. Cheers!!

My PhD Friend's Theory

Since launching this blog a few weeks ago, I've discovered that the most loyal readers from my modestly sized audience are (1) my mother, (2) other family members, and (3) fellow economics classmates. I recently was delighted to get an email from a friend and former classmate who is currently getting his Economics PhD at one of the world's most prestigious schools. He wanted to pass along the "jist" of a nifty labor economics model he's been working on for describing "shirking" behavior in relationships. Here you go:

It takes effort to do a job correctly, and because effort is costly, sometimes individuals will "shirk" under certain conditions. When an individual shirks, he/she knows that sometimes he/she can get away with it. (If this were not the case, surely we would NEVER check Facebook, ESPN, or our blogs while we're at work. . . . )

Anyways, let:
w = wage
c = cost of "effort"
p = the probability of being caught shirking

If our bosses want us to NOT SHIRK, they should be sure that our expected earnings from shirking are less than our expected earnings from doing a good job. Therefore, they should set the parameters, w, c, and p, such that:

(expected shirker wages) < (non-shirker wages)
w(1-p) < w-c
w> c/p

In a dating context, if we want our partner to avoid being a slacker in a relationship, we should do the following:

INCREASE W
- Most of us like it when our s.o. says nice (sincere) things to us, helps out around the house, takes care of us, and is nice to our family members and friends. This one's a no-brainer.
INCREASE P (but not too much)
- Stand up for yourself if your s.o. skimps on R-E-S-P-E-C-T, but don't choke him/her with excessive monitoring ("stalking"). Let them enjoy their guys' nights/girls' nights in moderation, but don't let them walk all over you either.
DECREASE C
- I once heard a girl complaining about a guy taking her to a "chain restaurant" (I think it was Olive Garden or Red Lobster) on a date. Waaa, waaa!!! (BTW-does that make me unclassy for liking those kinds of restaurants??) If you're too high-maintenance, it will be a lot cheaper for your s.o. to walk away than to put up with you. We can't always blame a high-maintenance s.o., though. If we are "too" invested in our work, sports, or other people, we make it more costly for ourselves to put other things on hold and focus on our relationships.

This model is just a start--any other ideas, readers???

(Many thanks to my PhD friend for putting this model together!!)

The Meanings of "Unemployed" and "Unattached"

(Image borrowed from http://chattanoogapulse.com/wp-content/uploads/2009/06/unemployment-300x225.jpg)

Just two weeks ago, the Bureau of Labor Statistics announced the highest unemployment rate the U.S. has seen in over 26 years. As a soon-to-be college graduate, I am incredibly grateful to have a job offer, but I also feel the pains of my peers who are about to leave the comforts of B-Y-woo and enter an unwelcoming labor market marked by 10.2% unemployment. To some of my friends, the prospect of unemployment means uncertainty and financial stress. In economic terms, however, what does it really mean to be "unemployed"? Loosely speaking, an individual is considered "unemployed" if he or she is actively looking for work but cannot find a job. In Econ 110, we also learn that unemployment is actually a function of at least three major categories of unemployment: cyclical unemployment, structural unemployment, and frictional unemployment.

1. Cyclical unemployment occurs during downturns of the business cycle, when a decrease in the aggregate demand for goods and services lowers firms' revenues and causes businesses to lay off workers. The current unemployment problem is due largely to the business cycle. The government may try to alleviate cyclical unemployment by implementing fiscal policy (like the Stimulus Package), and the Federal Reserve may also intervene by conducting expansionary monetary policy (lowering interest rates to increase investment). Of course, some laissez-faire economists may advocate doing nothing, i.e., letting the business cycle correct itself in due time.

2. Structural unemployment occurs when workers do not "fit" the qualifications of vacant jobs. In recent years, a large supply of construction workers got laid-off when the housing market collapsed. Many of these men and women who had been trained only in construction-related vocations suddenly became structurally unemployed when they did not have the qualifications (education, credentials, etc.) necessary for filling the jobs that were available after the housing bubble burst. Structural unemployment can be alleviated when individuals acquire the skills and qualifications required for vacant jobs, and/or when they migrate to a different job market where their particular skill sets are more valuable.

3. Frictional unemployment is "natural" unemployment--the rate of unemployment an economy experiences as a result of individuals leaving old jobs for "better" jobs. Frictional unemployment is not necessarily "bad," but is, rather, a normal byproduct of free labor markets. One of the most common manifestations of frictional unemployment occurs when recent college grads (like my friends) search for jobs right out of college and are technically "unemployed" in the interim.

As it turns out, some BYU grads worry less about leaving school without a job offer and more about leaving school without a serious boyfriend/girlfriend or spouse! As in the labor market, though, being "unemployed" or romantically "unattached," may be disheartening, but it is likely a short-run phenomenon. In my opinion, the subject of "unattachedness" is less painful and much more exciting when viewed through econ-colored glasses. Let's assume that unattachedness in dating is the rate of individuals who are looking for dates, divided by the population of individuals who are dating and looking for dates. The categories of unattachedness happen to analogously align quite nicely with the categories of unemployment.

1. I witnessed an epidemic of cyclical unattachedness right after my freshman year at BYU when several of my dorm buddies had to say goodbye to their boyfriends before the guys left for two years to serve LDS missions. For a short while, a massive decrease in demand for dates from the 19-21-year-old LDS male population instantly made many of my friends and me cyclically unattached, and girls-night-dates with Mr. Darcy and Ben & Jerry's quickly replaced "real" dates with the Jims, Petes, and Sams of Deseret Towers. How do "institutions" alleviate cyclical unattachment? Well, our brothers-in-law and bishops may have tried to create aggregate demand "shocks" for us by setting us up with their former mission companions and/or encouraging us to meet worthy, kind "demanders" at ward parties. If all else failed, though, many of us managed to "wait out the slump," and become re-employed when the business cycle recovered (i.e., when summer ended and we found ourselves back at BYU in congregations full of eligible, recently returned missionaries).

2. Structural unattachedness may be a slightly more sensitive subject, because we've grown up learning not to care about what others think. For various reasons, though, we may be in situations where there are single young men/women to date, but we are not a good "fit" for the person due to mismatched "qualifications." In some cases, the supply of available daters may not be interesting to us (and vice versa) due to differences in personality, ambition, and age. Where appropriate or desirable, it may make sense to alter ourselves slightly to market characteristics (I think that just a bit of this is healthy in moderation, to the extent that "altering" means breaking bad habits and living up to our unique potential--not becoming a clone of someone else.) Some people combat structural unemployment by physically moving to better "markets" (e.g., from Fargo, North Dakota to Salt Lake City) or by joining sites like e-Harmony to electronically search for good matches.

I remember feeling "structurally unemployed" for a few months when I was home for summer break a few years ago. As an 18-year-old undergrad, I felt just a little out of place in my temporary suburban singles ward, where half the men were at least a decade older than me and were certainly not eager to date teenagers like me and my friends. Of course, there's no way I could have "altered" myself to become old enough to meet their qualifications. In hindsight, though, if I had been desperate to break into the suburban singles market, I suppose I could have lied about my age. But, like I said, unattachedness--like unemployment--is not unambiguously bad, and I still had a fun summer, even when dating slowed down.


3. Finally, frictional unattachedness is possibly the happiest type of unattachedness. Frictional unattachedness is the flavor of unattachedness many of us would like to be--the Meg Ryan of the Chick Flick world, if you will. When Meg breaks up with her nerdy-cute bf near the end of You've Got Mail, she naturally feels a bit of sadness but is optimistic about searching for future (better) prospects. As a result, Meg skips through the streets of New York with determination and spirit, and sure enough, she finds her corporate, instant-messaging Prince Charming: Mr. Joe Fox.

So no matter what category of unattachedness you think describes you, here's to letting well-meaning relatives meddle with our dating demand, improving ourselves to align with market characteristics, searching for the happy ending of our Meg Ryan-Tom Hanks fairytale, and above all, enjoying the journey! :)

Excludability and Lessons from our Fathers

Mount Pleasant, Utah

I'm a firm believer that family history, like economics, can bring interesting and powerful insights into everyday life. Combined with basic economic intuition, then, the lessons of our fathers are even more magnificent. I recently reviewed the concept of "excludability" to Econ 110 students, and I offered the standard textbook explanation that a product is considered "excludable" if the owner can exclude others from using his/her product by charging prices and enforcing property rights. As I was walking home after giving my mini-lecture, however, it dawned on me that I could also explain excludability using tales from two of my relatives: my great-grandfather Obed, and my father.

Obed lived in Mount Pleasant, Utah from roughly 1880-1970 and herded sheep for a living. In many ways, Obed's sheep and land could be considered excludable products since Obed owned the property and only let others use his products if they purchased them at some price. Moreover, Obed could easily enforce his property rights by building fences, invoking the Second Amendment (not that he ever did), and wielding our family traits of courage and physical strength. . . . By being able to exclude others from using his property, Obed was able to protect the quality of his sheep and land. And, in fact, Obed had an interest in maximizing the current and future values of his property, since, as owner, he had the right to use his property for current and future income. Not surprisingly, anecdotal evidence from my father, who visited Mount Pleasant every summer and helped my great-grandpa herd the sheep, confirms the positive relationship between excludability and quality.

Although the she-conomist's family no longer owns the land in Mount Pleasant, the land is still well-maintained since the new owner, just like Obed, can still exclude trespassers from abusing his property. Suppose, however, that shortly after my family sold the land twenty years ago, the town council of Mount Pleasant forbade the concept of ownership altogether. All land, flocks, and capital would immediately become "common property," and it would be illegal to exclude neighbors from "borrowing" your sheep or "sharing" your land. What do you think might have happened to Mount Pleasant? Since both the ability to exclude usage and the incentives to protect the future value of property would be eliminated, everyone would opportunistically overuse land, slaughter sheep before their neighbors could "borrow" them, and let their homes run to shambles. In all likelihood, the economy of Sanpete County would collapse, crime would run rampant, and, let's just say that parents might be hesitant to send their children to Snow College for fear of their child's safety.

Drawing parallels to the Mount Pleasant scenario, I suggest that the degree to which we conduct our own lives and set "property limits" and "prices" in our dating activities can prevent the over-use and collapse of our physical and emotional well-being. In short, the extent to which we create effective filters to "exclude" undesirable prospects from dating us can make all the difference in whether our personal life operates more like private property or a common resource.

My dad taught me a valuable lesson in excludability early on. In our church, the youth aged 12-18 typically have an annual interview with the bishop sometime during the youth's birthday month. I remember getting interviewed by my bishop--who, at the time, was also my dad--around my 13th birthday. Several years later, I can still remember my dad's very loving and completely serious expression when he warned me to be very picky ("excludable") about the young men I with whom I associate and eventually date (growing up, my sisters and I were not allowed to date until we were 16). My dad told me, and still reminds me, that I am not obligated to go out with any guy just because he asks me, but that I must demand that guys "pay" me the utmost respect and compassion. (It goes without saying that I also must return the same kindness to those with whom I associate.)

Is the common property problem a big deal in dating? In my own experiences, I can honestly say that a refreshingly large proportion of the guys I've gone out with have been very respectable, honorable young men, and I like to think that I try my very best to return to them the same respect that I demand. That said, I have definitely seen the effects of hurtful social interactions, if not in my own life, perhaps in the lives of others. What price ought we set as our personal "excludability threshold?" I suppose everyone is different, but I personally avoid trespassers who exhibit any of the following behaviors, to name just a few: selfishness in physical affection, chronic negativity, lack of self-respect, and harshness in words. (Why spend time with someone who habitually belittles your intelligence, physical appearance, or talents--even if he/she justifies it by saying he's/she's just being "funny" or "honest" and is trying to "help" you by pointing out areas for improvement?)

Are people perfect? Of course not. We all are prone to putting our foots in our mouths and occasionally hurting others' feelings. However, to the extent that we can tell the difference between respectful "shepherds" who strive to do what's right and harmful trespassers, let's strive to set excludability limits and deliver the same respect to those around us. Whether or not your own father lovingly reminds you of your worth and counsels you to exclude trespassers--I personally believe that the ultimate reason for excludability is because by design, we are not just "common property," but, in fact, precious and infinitely valuable children of a loving Father in Heaven. Regardless of our pasts, He sees us as creations even more beautiful and pristine than the hills of Mount Pleasant, so why not see ourselves and others the way HE sees us by doing unto others as we'd have done to us?

Moral Hazard and Letting Yourself Go (Appearance-wise)

Source: http://www.infoniac.com/uimg/women-putting-make-up-on

Moral hazard occurs when an individual becomes insured against some risk and subsequently takes less care to protect himself from that risk. For example, many have worried that the government's bailouts of big banks have created a moral hazard in which banks are now incentivized to engage in even riskier financial practices, "knowing" that the government will just bail them out if they get into trouble in the future.
The other night, my roommate and I were both getting ready for dates at the same time. In both of our cases, these were 1st- or 2nd- dates with the particular guys. As we stood behind the bathroom counter, powdering our faces and shaping our eyebrows, she said, "You know what I miss about being in a relationship? Not needing to take so much time to get ready for a date!!!" I chuckled in agreement. So true. Now, it's not like we let ourselves become ugly as soon as we have a boyfriend, but I know that I tend to let a few things slide. . . . like, maybe I'll get a little lax on keeping up with my pedicures, or maybe I'll be okay with wearing my hair in a ponytail more often instead of always curling it, or maybe I'll actually let my bf see me without makeup--especially if we're going on a hike, playing tennis, or doing something of the sort.

Okay, I hope I haven't just blacklisted myself from the date list of any cool guys who might be reading this thing, but, for what it's worth, I can assure you that I'm not the only girl who may behave this way. Besides, I know that guys certainly respond to the same incentives; i.e., some may take a little less care in their appearance/manners once a relationship is secured. It's as if the added commitment of seeing someone consistently acts as a mild "insurance" against getting dumped on a whim. Sound like a moral hazard to you? Sure.

Is this a major problem? I don't think so. First of all, what's the harm of occasionally wearing a little less makeup or maybe "forgetting" to open her car door after dates 1-3? (Sources tell me, in fact, that plenty of guys complain about girls wearing "too much" makeup.) Also, there's a limit to "risky" behavior. It's true that being in a relationship gives both participants a sense of security or insurance, but it's certainly not full insurance against breaking up. After all, for every relationship I've entered, I've also gone through a subsequent break-up (that kind of has to be true mathematically, doesn't it?) And just as insurance companies mitigate the moral hazard problem by instituting coinsurance, premiums, and deductibles as ways to incentivize the insured to "share the burden of the risks," our level of personal commitment to a given relationship prevents us from doing anything too drastic that would make our partner suffer a "loss" and walk away, thereby hurting us in the process.

So, here's to fighting the moral hazard and keeping ourselves looking hot well beyond date #1! ;)

Engagement Rings for Men: Lowering Search Costs for the Single Ladies

Searching for information is costly. I'm planning on buying a new car after I graduate next month, and in anticipation of this major purchase, I'm searching for information to ultimately help me make the optimal purchasing decision. In what way is searching for information costly? It may be true that I can get tons of information on different car models for "free" on the Internet, but it is the overwhelming abundance of information itself that speaks to the costliness of searching. It takes time to (a) find information sources, (b) judge the sources' reputability, and (c) sift through loads of information. To the degree that I have valuable alternative uses for my time (believe me, I do more than just blogging and grading papers), searching is costly.

In dating/social situations, we search for information all the time. As we explore the possibility of making a social "transaction," (i.e., going out with a desired dating target), we first gather information about that person through any number of activities: discretely "checking them out," Facebook stalking them, interrogating mutual friends about the target, and, of course, simply talking to the person to gauge the depths of his/her intellectual and social aptitudes.

It turns out that searching for dating information is not costless. For one thing, not everyone has Facebook, so you can't always rely on using the Internet to do quick and easy research. Also, you and the target may not have any mutual friends, so it could be cumbersome to get "character references." Moreover, simply approaching the target and flirting/conversing with him/her to gauge potential is certainly costly in terms of time, effort, and guts.

As a "sassy," single female, I have a request that may pertain to some of the males out there: I know a really easy way for you to lower our search costs and also avoid awkward/unwanted flirtation "transactions" with us. If you are married: wear your ring. That's usually not a big deal; I think that most BYU wives are pretty good at enforcing that one. If you are engaged: You should ALSO wear a ring--on your left hand ring finger. Yes, it's disappointing to catch a glimpse of an attractive guy only to immediately discover, upon a quick "ring-check," that he is taken. However, that scenario is much better than flirting with a ring-less guy and then seeing him two weeks later with a gold band on his ring finger, finding out that he got married over the weekend and was, therefore, engaged at the time of said flirting incident. Have I ever been that girl? Why else would I write this post? In essence, knowing whether someone is engaged/married, through an easy inspection of whether that person is wearing a ring, is a valuable piece of information, since it minimizes embarassment costs and reduces the need to search for additional information on an individual's relationship status.

I have one friend who made her now-husband wear a ring while they were engaged, and he happily obliged. Those two are my heroes. Is it too much to ask men to wear engagement rings? I'm sure there are others out there besides me who have been an initiator (or victim. . . ) of unwanted flirtations resulting from ignorance on someone's relationship status. . . .