Love, Markets, and Other Failures#
A semester spent taking one metaphor seriously
A market is#
- a scarce thing
- allocated among people who want it
- under rules nobody fully controls
Housing is a market. University admission is a market.
This course’s claim: courtship is one too#
What that buys us#
- search costs — week 2
- signaling vs. cheap talk — week 3
- adverse selection — week 4
- screening — week 5
- optimal stopping — week 6
What it costs us#
The claim is not that romance is “just” economics.
It’s narrower: wherever information is uneven and outcomes depend on what others do, markets fail in specific, nameable ways.
The semester is a tour of those failures, in order of how badly they hurt.
A market failing, on schedule#
Before 1950, US hospitals hired new doctors through interviews, then offers. No prices adjusted — just timing.
| Year | What hospitals did |
|---|---|
| pre-1945 | Interview, then wait for an offer |
| 1945 | Offers race earlier every year |
| 1949 | “Exploding” offers — decide in a day, no comparison possible |
| early 1950s | A centralized clearinghouse fixes the timing |
Nobody was irrational. Everyone was reacting correctly to everyone else.
Same shape, different market#
| Residency market | Courtship market |
|---|---|
| Interview → wait → compare offers | Meet → date a while → decide |
| A competitor jumps the gun | One side asks to “lock it down” early |
| Exploding offer: decide before comparing | Ultimatum: decide before dating anyone else |
| Clearinghouse restores comparison | Week 8: what a fair “compare all at once” looks like |
Nobody has to act badly for the whole arrangement to end up earlier, and less informed, than anyone wanted.
The shape of the semester#
| Act | Weeks | Question |
|---|---|---|
| I — Search | 1–3 | how do you find anyone at all? |
| II — Screening | 4–6 | how do you tell good information from noise? |
| Hinge | 7 | who moves, and what does moving cost? |
| III — Matching | 8 | can a match be stable? |
| IV — Living with it | 9–12 | what happens after “yes”? |
Tutorial 1#
Bring a market that isn’t romance — housing, hiring, college admissions — and be ready to name its frictions out loud.
One thing this model won’t explain#
The clearinghouse fixed the residency market’s timing. It never asked whether earlier certainty was worth anything on its own.
This course’s model does the same: it prices the inefficiency of being rushed, but has no term for the anxiety, or the relief, itself.
Week 12 comes back to this.
See you next week#
Week 2: Discovery & Search Costs