They plan to meet up at a café to understand each other better. The café, which has to pay a high rent considering its location in a place like Hudson Lane or Hauz Khas, charges a high price for even a simple coffee, citing ambience and service. The date is going well with multiple rounds of desserts and great food. The waiter eagerly awaits a good tip. All this directly impacting the food industry which had taken a slump in the Covid Restriction Phase. To impress X, Y also brought along a bouquet of flowers. Spending adds on to the economy in the Keynesian framework. All this gives a basic idea of how several such small stories add on to the economy in the bigger picture. Hence justifying in some ways: ‘The Economics of Small Things’.

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But what I wish to highlight through this tale of modern dating includes the macroeconomic concepts of ‘Asymmetric Information’ and ‘Adverse Selection’.

Asymmetric Information as given by Gorge Akerlof in his 1970 Article on ‘The Market for Lemons: Quality, Uncertainty and the Market Mechanism’ talks about a phenomenon where in an economic market, no one has perfect information. The seller has more information than the buyer thus creating an asymmetry.

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Coming back to our story of X and Y, X probably knows way more about herself than Y can find out in the limited days of courtship. For all we know X might be portraying an image that is not even close to what she is in reality. Same goes for Y. So the economic concept of ‘Asymmetric Information’ can be seen in a social set up as well and it trickles down in the behavior of people. So if X and Y decide to get into a relationship based on the limited information that they have of each other, they might feel in some three to four months that they made a wrong decision and the deal would be called off.

This could be one reason why modern relationships come with an expiry date.

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One of the disadvantages of this lack of information is ‘Adverse Selection’. It is mostly talked about in high risk ventures such as insurance, where a lack of information about a premium leads to bad investments. Let us consider ‘dating’ to be a risky venture with risks such as emotional turmoil, dissatisfaction and psychological trauma. The withholding of information by either of the parties makes either or both the parties liable to losses. The last problem associated with this issue is ‘Moral Hazard’. Moral Hazard occurs when there is asymmetric information between two parties but the change in behavior of one party is exposed after the deal is struck. In this scenario it could be that Y who initially claims to be a good communicator becomes avoidant or worse, that they were already seeing someone.

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While X and Y may or may not have a fairytale ending, one thing is for sure that none of them have perfect information or information symmetry in the set up that they met. In conclusion, I believe that economics is as much empirical in nature as it is behavioral. The various economic concepts see their proofs and logicality in every day occurrences. Modern Dating is just one such example of a social happening that sees the prevalence of these concepts.