The Economic Anatomy of a Breakup

breakup Most of us have been through at least one breakup in our lives and we know how much fun they are. Usually it hurts both parties, one almost always more than the other. Can economics be applied here? Of Course! This is a continuation of my dream to start the foundation for the study of economics of relationships and dating.

Everyone has a supply and demand for love and being with other people romantically. They choose to be in a relationship when marginal benefit (MB) exceeds or is equal to marginal costs (MC). The choose to break up when marginal costs exceeds marginal benefits. Obviously, when I mean marginal the unit can be time.

When you first date someone and everything seems to be going perfect its because you have the initial spark everyone talks about. You are learning about each other and its fun. Information is flowing towards you and as a rational individual you will give forth the information that looks the best on you. This is somewhat like a stimulus package. In the short-term, you are shooting up your marginal benefit so that person stays with you.

In order to understand how a breakup happens we must look at how benefits and costs in a relationship change. After the honeymoon period ends this is when the MB and MC become more realistic. Therefore, we can assume there is asymmetrical information where obviously the person knows themselves better than you know them. Some of the things you find out may change your perceive cost of being with the person and that ends up in a break up.

The person who is breaking up with the other person obviously values being alone more then they value being with that person. This is why in many cases when people say, “we could try again another time” usually doesn’t happen. That was a way of comforting the other person while you get what you want and skate away. Break are often the same way. Many people say that breaks are just a transition to a breakup and in most cases I would imagine this to be true. The person is just trying out how life would be like without the other person.

People then get back together because they realize that being apart is more costly than they thought and that the marginal benefit actually exceed marginal costs. On again off against relationships are truly on the margin. The people in the relationship cannot figure out whether MB > MC or MB < MC and it probably is pretty close to MB = MC.

I haven’t really used this to solve any of the solutions but something to think about. So maybe this was all obvious to you or maybe it makes you look at a breakup differently.

~PCCapitalist

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Published in: on May 30, 2008 at 3:10 am  Leave a Comment  

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