How Well-Endowed Are Your Online Dating Prospects?

The emergence of non-traditional markets is one of the more rapid developments in the American economy.  For example, thanks to Airbnb there is now a semi-legitimate market for “a three bedroom house in the Southern part of Nashville for a single Tuesday night in November.” Sites like Craigslist and Etsy are also driving the creation of markets that were previously non-existent.

Given the growth of these new markets, it’s important to ask whether they induce different behavior than more traditional markets. One answer is that non-traditional markets have larger endowments effects (i.e. the tendency to believe something is more valuable when their is a sense of ownership.) Research suggests there are increased endowment effects — as measured by the ratio between the “willingness to accept” price (WTA) and the “willingness to pay” price (WTP) – in cap-and-trade markets for pollution permits, and according to a new study, in markets for contact information of potential dates.

The endowment effect appears to be much stronger in markets for environmental goods that are not usually monetized than in traditional markets. This study explored the effect in another non-traditional market: the dating market. In Experiment 1, participants were asked either for a buying or selling price for the contact information of each of 10 dates. The WTA/WTP ratios within this market were higher than in traditional markets and, unexpectedly, much higher for women than for men, with an average ratio of 9.37 and 2.70, respectively. Experiment 2 replicated this result and found in a within-subject design the usual WTA/WTP ratio for coffee mugs. The paper concludes with a discussion of differences between traditional and non-traditional markets, with a special emphasis on the dating market.

This seems like the kind of cute but insignificant study that tends to attract a lot of media attention, but it does have the potential to help shed light on pricing patters in non-traditional markets. I also wonder whether it’s relevant to the rapidly emerging markets involving personal information. Could large WTA/WTP ratios emerge when a company sells information to advertisers, or is there no real sense of ownership to “endow” the information with value?
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Nataf, C., & Wallsten, T. (2013). Love the One You’re With: The Endowment Effect in the Dating Market Journal of Economic Psychology DOI: 10.1016/j.joep.2013.01.009