What does economic theory have to do with dating?

When I was getting my Master’s in Behavioral and Decision Sciences three years ago, I put together a presentation that I’ve meant to turn into a post every Valentine’s Day since. While friction and the planning fallacy got the better of me in past years, last night I was in a writing mood and decided now was the time, so here we go….

There are many ways people can begin dating. And while using a classic economic theory to describe one of those ways may threaten to take the romance out of it for some, I recommend you keep reading if you, like me, find these applications to be both very entertaining and surprisingly able to shed light on seemingly separate situations.

Phase 1: What is a coordination game?

Before diving into how this all relates to dating, we first need to establish what is coordination from an economic standpoint. In a subset of economics called game theory, “coordination games” are games with two Nash equilibria, which is a fancy way of saying a stable state (which, for those who care, is stable because given there is no change in the other person’s behavior, an individual can’t improve their outcome by changing their own behavior). There are two hallmarks of coordination games:

1. They involve interdependent choice — in other words, an individual’s preference depends on what the other player does.
2. The two individuals playing the game are not competing against one another and do not have conflicts of interest. In an ideal scenario, everyone would prefer to coordinate to get to the equilibrium with the higher net payoff.

So what’s the issue? The world doesn’t always present us with the perfect scenario, and we don’t always have complete information. Because of that, even though people have aligned incentives, coordination can become tricky when there’s uncertainty.

Now that we have the basics of coordination, let’s get more specific….

Phase 2: The Stag Hunt game

The Stag Hunt game is a specific kind of coordination game. The classic example of it is one in which there are two hunters who can either coordinate a joint effort to catch a stag (a bigger and more valuable prey) or individually could catch a hare (a smaller and less valuable prey). The catch (no pun intended) is that they’re only successful in getting a stag if they do it together. If one hunter chooses to go catch a hare, they get the hare, and the other who tries to get a stag comes up empty. This is also called the “insurance game” because while catching the hare doesn’t yield the largest possible utility, it does yield a guaranteed utility, making it a safe move.

A visual example of the options hunters have and the utility it leads to are shown in the table below. On the outside of the table, you’ll see the options each hunter has. Inside the table, the numbers you see are called “utilities,” which you can think of as how good or bad that outcome would be for each hunter. You’ll notice some outcomes result in the same utility for each hunter and some outcomes result in different utilities for each. A quick caveat that it’s not so much the specific numbers that are important. What’s important is which numbers are bigger or smaller relative to other numbers in the table.

Now that we got all that down, let’s get to the juicy part and apply this to dating.

Phase 3: Applied to dating

Sometimes people start dating right away, but oftentimes they’re friends first. When they are, a leap has to be made from being friends to dating. This decision each party must make on whether to remain friends or try to make that leap to dating reflects the Stag Hunt game.

Now, as a disclaimer, we’re about to walk through some utilities. And to reiterate, instead of focusing on the specific absolute value of each utility, I’d instead invite you to focus on the relative values and the valences (e.g., positive or negative) of each utility because we’re looking at relative preferences and whether someone’s feelings towards an outcome are generally positive or negative.

Okay so let’s say two people are friends and are happy as friends but would rather be dating. That could give us two possible equilibria and their utilities might look something like this:

The thing here is that this is a coordination game, and as we established in Phase 1, coordination games have interdependent choice and become tricky when there’s uncertainty.

So let’s look at a couple of other scenarios. If one person decides they want to be friends and the other person decides they want to date, their utilities might look something like this:

These utilities represent that the person who says they want to date is embarrassed and suffers the negative utility of rejection when the other person says they want to be friends, and the person that says they want to be friends isn’t as happy as they would have been if they had just kept going along being friends the whole time.

Just like in the Stag Hunt game, each person’s preferred option depends on what the other person chooses.

And while feelings and what the other person will “play” may be apparent to your third party friend, when you’re the one in the position of making this decision you don’t know what the other person will choose.

So where do we end up?

Phase 4: Possible outcomes

Which of these two potential equilibria do we end up with?

Simply put, it depends.

The outcome with the highest possible utility is finding out you both want to date. But being friends is safer. While the overall utility isn’t as high as the dating/dating scenario, the friends/friends scenario does yield a relatively stable utility and help you avoid the extremes. A desire to avoid the negative extreme may be especially salient because of some well-documented behavioral science principles. I’ll explain that in a moment but first we have to get to the worst possible outcome….

Worst is telling someone you want to date them and they just want to be friends. And as one of the most foundational behavioral principles (i.e., loss aversion) tells us, loses loom larger than gains. In other words, we’re especially sensitive to losses. That’s why losing money in the stock market or a bet often hurts more than winning an equivalent amount feels good. This sensitivity to losses might drive risk aversion and lead people to opt for the safer, “insured” choice of friends. Which of these outcomes we end up at, among other things, depends on the risk-taking propensity of each individual.

But for all my risk-averse friends out there, I’ll leave you with one final thought: sometimes it’s actually riskier to say nothing… because you risk that person slipping away.